Financial Advice For My New Daughter

My wife and I welcomed a daughter into the world yesterday.

Her only job now is eating and sleeping. But, one day, when she needs financial advice, here’s what I’ll tell her.

It is easy to assume that wealth and poverty are caused by the choices we make, but it’s even easier to underestimate the role of chance in life.

Everyone’s life is a reflection of the experiences they’ve had and the people they’ve met, a lot of which are out of your control and driven by chance. Being born to different families, with different values, in different countries, in different generations, and the luck of who you happen to meet along the way plays a bigger role in outcomes than most people want to admit.

I want you to believe in the values and rewards of hard work. But realize that not all success is due to hard work, and not all poverty is due to laziness. Keep this in mind when judging people, including yourself.

The highest dividend money pays is providing the ability to control your time. Being able to do what you want, when you want, where you want, with who you want, for as long as you want, provides a lasting level of happiness greater than any amount of fancy stuff can ever offer.

The thrill of having fancy stuff wears off quickly. But a career with flexible hours and a short commute will never get old. Having enough savings to give you time and options during an emergency will never get old. Being able to retire when you’re ready will never get old. The ultimate goal is independence, but independence is not black or white, all or nothing. Every dollar you save is like owning a slice of your future that might otherwise be managed by someone else, and whatever their priorities are.

Your parents will work hard to support you and open the doors of opportunity. But we’re not going to spoil you. We’re not trying to be mean. But no one can learn the value of a dollar without experiencing its scarcity. Learning that you can’t have everything you want is the only way to understand the difference between a need and a desire. It will teach you how to budget, how to save, and how to value what you already have. Learning to be frugal without it hurting is an essential life skill that will come in handy during life’s inevitable ups and downs.

Napoleon’s definition of a military genius is the person “who can do the average thing when everyone else around him is losing his mind.” Managing money is the same. You don’t need to do amazing things to end up OK over time. You just have to consistently not screw up for long periods of time. Avoiding catastrophic mistakes – the biggest of which is burying yourself in debt – is more powerful than any fancy finance tip.

Learning how to live with less is one of the most powerful financial levers, because you have more control over it than things like your income or investment returns. The person who makes $50,000 but only needs $40,000 to be happy is richer than the person who makes $150,000 but needs $151,000 to be happy. And the investor who earns a 5% return with low expenses may be better off than the investor who earns 7% a year and needs every penny of it.

How much you make doesn’t determine how much you have. And how much you have doesn’t determine how much you need.

It’s OK to change your mind. Almost no one has their life figured out by age 18, so it’s fine if you pick a major you end up not enjoying, or even get a degree in a field that isn’t your passion. It’s fine if you work in a career and then decide you want to do something else, and it’s fine to admit that your values and goals have evolved. Forgiving yourself for changing your mind is a superpower, especially when you’re young.

Everything has a price, and I’m not just talking about price tags. The price of a busy career is time away from friends and family. The price of long-term market returns is uncertainty and volatility. The price of spoiling kids is their sheltered life. Everything worthwhile has a price, and most of those prices are hidden. They’re often worth paying, but never ignore that they are true costs. When you accept this you’ll view things like time, relationships, autonomy, and creativity as currencies that are as valuable as cash.

True success is when the people who you want to love you do love you. And that love comes overwhelmingly from how you treat people, rather than a level of net worth. The most important financial advice I can give is that money won’t provide the thing that you and almost everyone want most. No amount of money can compensate for a lack of character, honesty, and genuine empathy towards others.

Your world will be different than mine, just as mine is different from my parents’. So it’s OK to reject any of this advice. Everyone’s different, and no one has all the right answers. Never take anyone’s advice without contextualizing it with your own values, goals, and circumstances.

Your parents love you. Welcome to the world. Please let us sleep.