20-ish Personal Finance Rules To Teach Your Kids (Or Yourself).

While visiting friends I have known for over a decade (or two?) in North Carolina, they mentioned that they had purchased a vacation time-share that they were still paying for. If I remember correctly, they estimated that they had already spent $20,000 on it. Time shares are horrible liabilities, but many people fall for them because the companies that sell them lure people in with high-pressure tactics and cheap hotel stays.

For the rest of the evening, my heart sank, and I wondered how many other dear friends and family had gotten stuck with one of these so-called 'investments.'

A few days had passed and I was snoozing with the family on the couch after work. For some reason, my mind went back to that conversation, and I started worrying about the kids.

"THERE IS SO MUCH I NEED TO TEACH THE CHILDREN ABOUT MONEY!" I exclaimed, to EyeDot's bewilderment.

I opened my eyes, jumped off the couch into my favorite recliner and started typing furiously on the laptop. Without further introduction, here are HijabMan's Financial Rules For Life. I'll use this list and expound upon a few of these items in future posts. They are aimed at my children with a focus on simplicity.

1. Never buy a timeshare. You’ll get hit with management fees for the rest of your life.  Definitely take advantage of the cheap vacations that they offer you to try to sell you the timeshare just enjoy your cheap vacation and DON'T SIGN A DAMN THING.
If you are susceptible to high pressure situations, STAY AWAY!

2a-d. Live frugally. Buy used when you can. Try to live in a low-cost-of-living-area. Bike more and drive less. When you get a raise or bonus, invest it. Don’t spend it. Don’t ‘inflate’ your lifestyle.

3. Just getting started in adulting? First, save 6 months of your total living costs. Then try to max-out your retirement accounts (see below) and invest in total-market-style INDEX FUNDS/ETFs that track index funds. If you can max out those retirement accounts, open a non-retirement brokerage account and do the same thing.

[3a. If you are American, first contribute to your 401K if you are offered one, then your Traditional IRA. If you are Canadian, contribute to your RRSP and your TFSA. Remember these are just accounts, not investments, you have to buy investments with the money that you have moved into those accounts.]

4. Do not panic and sell your investments. The market will recover. Just stay the course and invest. What you are doing is "dollar cost averaging." You buy in the lows the highs and everything in between.

5. Do not go to anyone called a Financial Planner. They do not have any responsibility to help you. They will steer you to products that enrich themselves. If you really need help, go to a Fiduciary.

6. Scams are everywhere. You will likely receive all manner of calls, mail, emails, and texts about refinancing your house, registering for something you don’t need, or even people telling you they are from the IRS and they are going to arrest you. They are scams. Don’t give in. Don’t click on anything suspicious. Pay attention to who you do business with. If something smells fishy, it likely is.

7. Do not buy a new car. But if you have to, make it a Toyota or a Honda. Cars are not investments. They lose value. Buy used cars in good condition. Hondas or Toyotas. They are boring and that is a good thing. They cost less to maintain and last for a very long time. Do not buy any extended warranty.

8. Depending on your location, investing in the market (remember: Total Stock Market/S&P 500 index funds) is almost always easier than buying a house. When house prices are insane, it is often better to rent and put that down payment in the market (Total Stock Market or S&P 500 index funds!), and not worry about home maintenance, insurance, property taxes, or even having to sell a house because of a sudden job change. Buying and selling houses also comes with transactional costs and real estate agent fees, not to mention mortgage interest. That being said, there may be a time and place when its worth it to buy a home for stability and good schools for the kids, but understand that it likely comes with a financial cost. Your money will be tied up in the house and not so easily accessible. So if you do buy a house, get a fixed-rate mortgage, and pick one that is cheaper, and that you can make easy improvements to. There is also something to be said (both financially and spiritually) about buying real estate and providing homes for people who need them. I've done it, but I much prefer the simplicity of clicking a few buttons on Vanguard's website.

9. Do not hoard things. Commercials & Ads will tell you that you need all of the latest and greatest phones, computers, clothes, etc. No need to fill your house with junk or put stuff on every wall. Buy things that you will use. You will be amazed at how fast you can clutter your living space. Some people, for example, get really attached to books that they read once. Go to the library or borrow e-books. Books are heavy, and heavier when you have to move them.

10. Study something that will give you a good return on investment in terms of income. Trust me, it will make life easier, even if afterward you choose to pursue something you like better. Think of it as an insurance policy. Bonus points if you can work remotely and live anywhere. People who say money can't buy your happiness are lying to a certain extent. Being financially secure is priceless. My first job after a relatively worthless $100,000 University degree was as a $6.25/hour ice cream scooper. On top of that I paid an extra 4% on my income taxes for living in Philadelphia.

10b. Don't underestimate the value of learning a trade, even if to just DIY some stuff: plumbing, electric, carpentry. They teach you useful life skills in addition to a stable income. At the time of this writing, there is a shortage of trades people. The downside? Relatively physical labor.

11. University is a crazy large expense in the US, but there are ways around it. Here are a couple things to get you started. Study for as many CLEP Tests as you can (they may also work among Canadian Universities). They can single-handedly knock out 6 credits of university for the low low price of $89 and some studying. After screwing up my schedule, I was able to graduate university only through a Biology CLEP test. You can also go to Community College for 2 years and then transfer to a 4 year school. In short, do whatever it takes so that you and your kids aren’t stuck with student loans. The loan servicers in the US are horrible, and you do not want to deal with that.

12a. Use a Credit Card as soon as you are able. Not a Debit card. There are countless reasons for this, from more fraud protection, to Credit Card points, to an interest-free loan for a month on your purchases, building your credit score, and sometimes they even come with their own insurance!

12b. Pay off the Statement Balance on your credit card in full EVERY MONTH.
Credit cards (at least in North America) are great ways to receive sign-up bonuses for Air Travel/Cash Back as long as you use them responsibly. I have traveled all over the world for free or cheap as a result of this.

13. Credit unions are usually way better than banks in the US. Less fees. And less evil.

14. Spend money on traveling, experiences, charity. These are things that will grow your soul (and brain) and make you feel more peaceful.

15. You may feel jealous of other peoples lifestyles, gadgets, fancy cars, big houses. You’ll want to ‘keep up with the joneses.’ Do not fall for this trap. Your financial goal is to build wealth so you can do whatever you please, not accumulate debt that will imprison you. Many people who are living extravagantly have credit card debt, are stuck paying high interest and not saving as they should or could.

16. If you follow this advice and it leads to financial success, you will likely have built up a good amount of wealth. Remember to designate beneficiaries for your investment and retirement accounts (that would be your spouse/kids or other relatives if you are not married).

16b. If you do end up buying property, set it up so it is sold before or when you pass, so the proceeds become part of the inheritance. You don't want the kids to fight over property. It happens more than you think.

17. Get term life insurance when you have kids, especially if you have a single earner household and you are just starting work. When I wasn't working, we got a 1 million dollar, 20 year policy that cost us around $800 per year. That would make it so until the kids were independent, I could take care of the kids if EyeDot died. This becomes less and less important as your investments grow.

Teach the children ft. WilyKit & Tokwan

17b. When your assets are greater than your car insurance deductibles, get an umbrella insurance policy. It's usually cheap and very much worth it to protect your assets.

18. Every couple of years shop around to compare home & car insurance costs. They often inflate the price every year. Switching around can save you hundreds of dollars per year

19. Documents you should fill out: Living Will & Healthcare Power of Attorney. Many states have easy, free templates for these. These are documents that let people state their wishes for end-of-life medical care, in case they become unable to communicate their decisions. They also appoint someone to make any further decisions that need to be made.

20. Only give someone a loan A. If you have a contract in place that spells out the amount, and when they need to pay it back. B. If you are okay with them not paying it back. I gave a loan early on in my working life when I had no business giving one without a contract. In the end it ruined our relationship, and at this point it would’ve been better to just give her the money. In other words, better to just give when you are able.

21a. Never be afraid to ask, do what it takes to not be afraid to ask— for a discount, for something for free if a company screws up, to negotiate a bill lower, to question an overcharge, etc. I routinely negotiate cell phone bills down, get credit card fees waived, and I have even successfully bargained in malls. My mom taught me this, and we’ve saved thousands of dollars as a result. Most people don’t do this, and it literally takes 30 seconds to 5 minutes. This works the best in the US, but I’ve done this everywhere, from Egypt to Malaysia.

21b. Beware of things you are automatically signed up for. Cancel them immediately, and call to get a refund for what you were already billed. For example, cell phone company Verizon regularly and automatically opted us in for some sort of ‘cell phone protection.’ All it took was a call to get it removed and refunded. They are happy to do it. You know why? Because millions of suckers are too afraid to call and ask or question charges.

It’s your money. Fight for it, save it and invest it. Perhaps most importantly: do with it what will make your soul grow peaceful.

Give this to my grandkids.