I do not have an ounce of regret in me. My history is why I am who I am. Still, I recognize that financially speaking, there were some fantastic opportunities in my past that I did not take advantage of due to lack of understanding. If I could get a financial “do over”, this is how I would do it.
I would have “House Hacked”
If I could have a financial “do-over”, my first house would have been a duplex or quadplex or maybe even a split level suitable for renting out. My first house as it turns out was not suitable for a roommate or otherwise renting out because all of the bedrooms and bathrooms were located on the same floor. I don’t think my then fiancé (now wife) would have much enjoyed that experience.
But if I had had the wherewithal, I would have certainly understood that by purchasing a duplex or a quadplex as my first living arrangement, I could have rented out the other unit(s), while keeping one for myself. This has a number of huge advantages. First, financing for a primary home is very affordable in the US, whereas financing for an investment property is a little bit more expensive. I could have taken advantage of a low or no down payment mortgage and the rent from the other units may very well have covered my mortgage payment. I would also benefit by allowing the other tenants to build my equity in the property for me (as they would be paying down the mortgage, not me).
After a while, I could have moved out of the property to purchase my own first real home to raise a family and I would still have the rental property that would be paying off the original mortgage and likely leaving me with a little bit of extra cash each month to do with what I would please. Alas, I didn’t not have the understanding of the opportunity before me and so it was not meant to be.
I wouldn’t have made that Roth IRA distribution at age 25
If I could have a financial “do over”, I wouldn’t have made a silly nonqualified Roth distribution. When I was about 23, I opened my first Roth IRA account with a full service brokerage firm. After a couple of years, I decided that I knew enough about investing and the markets to manage the account myself (I hated paying fees and commissions). So I opened an account with E-Trade and proceeded to transfer the account to my new E-Trade account.
I may have known a thing or two about investing but I did not know a thing or two about taxes. Thus when I rolled over the account all the earnings I had made on the account were subject to income taxes and a 10% penalty! I wasn’t working with any advisors at the time so I just had to grit my teeth and bear it (I could have fixed the problem had I been working with an advisor).
I still have the account and it is still larger than my now Roth IRA by about the same amount as that original distribution but now that entire account is a taxable account which means all of the dividends and gains from sold stock are taxable (unlike a Roth where it is all tax free). It was a great learning opportunity but I’m not sure it was worth the likely tens of thousands of dollars it will eventually cost me.
I wouldn’t have bought an expensive truck
If I could have a financial “do over”, I would have kept more of my money when I was young. When I was about 21 years old, I was flush with cash from the Marine Corps owing to the fact that I did not have any other debt payments and I had just spent a number of months in Afghanistan where you can’t spend money anyway. Naturally, I did what any 21 year old would do; I bought a $30,000 truck. My prized purchase came with a totally reasonable 14% interest rate and a $300+ a month truck payment.
Don’t get me wrong, it was a nice truck and I ended up paying it off early and driving it for nearly 10 years. But when I traded it in for a more economical Subaru, I only got $5,000 for it. Looking back, I could have bought a much more reasonable vehicle and invested the difference! My $30,000 “investment” would have grown much larger instead of dwindling to a paltry $5,000. When I look back on my life over that 10 year period, I don’t think my truck added much to my sense of happiness or fulfillment. The only thing it did was get me from point A to point B and I’m not sure that’s worth $30,000+ to me.
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Erik Goodge is a CERTIFIED FINANCIAL PLANNER™ and the President of uVest Advisory Group. He holds a B.S. in Economics and Cognitive Science from the University of Evansville. Erik is a Marine Corps veteran of the Afghanistan campaign and Purple Heart recipient. He is from Evansville, Indiana, and currently lives in near-by Newburgh with his wife and daughter.