Rebuilding After Failure: My Financial Comeback Strategy
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Chapter 1: The Turning Point
Recently, while browsing Quora, I stumbled upon a thought-provoking question: "What would you do if you went completely broke tomorrow?" The answers I found were quite unsettling. Some individuals mentioned filing for bankruptcy or living in their vans until things got better. It’s fascinating to see how varied people's perspectives can be.
If it were me, I would focus on reducing expenses and starting anew. While my circumstances might remain unchanged, my approach to investments and career choices would certainly differ if I had to start from scratch. With the clarity of hindsight, I've learned that when you gain knowledge, your actions improve.
If you're a recent graduate or finding yourself starting over, this insight is for you.
Section 1.1: Listening to Your Instincts
Reflecting on my college days nearly nine years ago, I remember being broke and uncertain about my future. Sitting in my guidance counselor's office, I was deliberating my career path while finishing two degrees: one in supply chain and the other in marketing. The former was considered a "safe" option due to its high job placement rate, while the latter was my passion.
"I think I'd like to pursue sales or product marketing," I expressed. Yet, my counselor advised me to stick with supply chain for stability and better earnings. Fast forward to today, and while I value my supply chain degree, I spent too long in a career that didn't fulfill me. Eventually, I transitioned to sales, contrary to the advice I received, and my income has significantly increased since then.
Ultimately, if you're just starting your career, trust your gut. There are countless avenues to earn a living—choose one that resonates with you.
Section 1.2: Investing in Your Skills
Once I had a steady income from my job, I would prioritize investing in my personal development over stock purchases or cryptocurrencies. I'm currently preparing to take a course on data visualization and psychology to enhance my sales presentations.
It's crucial to keep improving your skills; if you're not advancing, your competition certainly is. Many people get caught up in daily life and neglect their education, doing just enough to get by. Regularly assess whether you're acquiring the skills you desire and making the progress you envision. If not, consider furthering your education.
The more proficient you become in your field, the higher your earning potential and the more opportunities you'll encounter.
Chapter 2: Simplifying Investments
In various discussions, I've mentioned that one of the biggest mistakes I made in my younger years was investing in individual stocks. I also built a complicated investment portfolio. However, you don't need to complicate your strategy to achieve wealth. For those new to investing, I recommend considering a target-date index fund.
Target-date index funds are straightforward: they adjust their risk allocation as you approach your retirement date. For example, if retirement is far off, your portfolio would be heavily invested in stocks. As your target date nears, the allocation shifts to include more stable bonds.
By selecting a target-date index fund, you eliminate the hassle of constantly rebalancing your portfolio or consulting a financial advisor. Furthermore, these funds have shown to outperform many ETFs. For instance, Jeremy Schneider from the Personal Finance Club demonstrated how a target-date index fund yielded him an additional $1,000 compared to his ETFs.
Keep in mind, not all funds are equal. I personally favor Vanguard's offerings due to their low fees and accessible minimum investments.
Final Thoughts
Mistakes in investing are part of the learning process. Reflecting on my past, I realize that purchasing individual stocks was unwise and managing my portfolio was labor-intensive. Personal finance is often not covered in schools, leaving us to learn on our own or seek out advisors, which isn't always ideal.
Most importantly, I wish I hadn't taken career advice from individuals lacking real-world experience, like my guidance counselor, who had no background in sales. If you're new to the workforce or starting over, resist the pressure to settle for a mundane job just to play it safe. The idea of a "safe" job is often an illusion; true stability is a myth.
If you found this article helpful, consider checking out the free investing 101 class or other financial resources offered by Making of a Millionaire.
This article serves informational purposes only and should not be taken as financial or legal advice. Always consult a financial professional before making significant financial decisions.