I’m 56 and Have $500,000 in Savings. Here’s the Advice I Would Give My 22-Year-Old Self

Meet Cynthia. She’s 56, debt-free, happily married with two grown kids and has a steady consulting business that pays her bills. There’s more: She also has $500,000 stashed away in savings. At first blush, her situation sounds pretty ideal. But Cynthia’s journey has been an emotional one, rutted with disappointment and shame. Let’s just say she wouldn’t mind having a word or two with her younger, more impulsive and spendy self—here’s what she’d say.

Cynthia’s first job was working in sales and earned her a salary of $200,000. With annual bonuses, she was making more than half a million a year. “The problem was, I had a bit of a gambling mentality,” she says. Instead of first building up a strong cash cushion to support her life goals, like buying a home, she started investing her money in startups. That decision prevented her from saving enough money for a hefty down payment, which can take years. That also means that, at age 56, she and her husband still rent their home.

There are up sides to renting, of course. As a renter, you have the flexibility to move more frequently whether it be for work or a desire to see more of the world. You’re not locked into a 30-year mortgage or paying property taxes or expenses for home repairs and maintenance. The downside is you don’t build equity in real estate, which is one of the best wealth-building strategies.

The Lesson: Independence has been the core of Cynthia’s decision-making all her life, but she realizes now that saving is the first step to achieving that freedom. (Home ownership is also very likely how Cynthia and her spouse will spend their nest egg.)

Early on, Cynthia signed up for multiple credit cards and practiced no limit on spending. At 25, she’d already racked up more than $200,000 in credit card debt trying to live a lifestyle far beyond her means, while still managing mounting student loans. Her younger self had a bit of an addiction to financial risk-taking and an unhealthy relationship with money. Growing up, she also had little to no discussion about money in her family, watching her dad pay for things with cash, but never had any sense of how they budgeted, saved or invested.

When she got married, this thinking became reinforced. She viewed her husband as a type of fail-switch. “Since he was steadier with his finances, I felt I could be riskier. We now had two pools of money to play with,” she shared. It wasn’t until she had kids that this mindset started to shift. With the added expenses of raising two kids, Cynthia and her husband found themselves borrowing money to cover daily living expenses, and their debt ballooned. The stress of this took a toll on their emotional well-being and began preventing them from reaching financial goals they set for the entire family, like paying for college.

The Lesson: You need a budget. Depending on income and family needs, the first 10 percent of your paycheck needs to go toward eliminating debt. And make sure you get the reward for it. Debt reduction can be incredibly motivating—and for someone like Cynthia it may be the key to if you continue the practice or not. (Cynthia favored the snowball approach.)

Angel investing is a long game and can take seven to 10 years to see a profit. It’s incredibly risky and not all investments make money. Many of the startups Cynthia invested in failed, which hit her hard financially because she often invested every dollar she had in these early-stage businesses. “I convinced myself and everyone else that the next big deal would pay off the debts,” she says. Ironically, Cynthia had become an expert in high stakes investing for venture capital. But even with a sophisticated understanding of the world of private investing, she didn’t have a basic understanding of personal financial planning.

Investments provide us plenty of creative freedom to be ourselves but only once we’ve protected our finances and our credit and are well on our way to growing our nest egg in a sensible way. As Cynthia has learned, it’s never too late to go back to the basics of investing 101.

The Lesson: The traditional investment pyramid suggests that you first need a strong foundation of liquid savings or cash. Having enough in cash provides a safety net if we get cut off from our income for any reason. You want to have one year’s worth of runway for emergencies. The closer you get to retirement, the more you’re going to want to have in cash accounts, which are earning upwards of 4 to 5 percent right now. Only after you have a portion of your nest egg safely in cash can you consider investing in diversified high-quality, dividend-paying stocks via low-cost index or exchange-traded funds. And if you contribute a constant dollar amount each month or year into these tax-deferred retirement accounts, you will avoid buying when the market is at its highest point. (This approach is called dollar cost averaging and is one of the most successful, tried and true long-term investing strategies.)

Cynthia’s addictive behavior around taking financial risks was a constant roller coaster of highs and lows and clouded her ability to embrace the foundations of financial planning. She didn’t set concrete milestones for herself at 30, 40, 50 and beyond. And she wasn’t honest or clear with herself on the steps needed to take to keep her credit score high, stay out of debt, or save enough to buy a house. The best way to tackle emotional insecurity around money is to look at the factors driving your spending. Why do you feel unhappy about your financial situation? What fear is influencing your decision-making? If you feel out of control like Cynthia eventually did, it may be time to consider reaching out to a financial planner.

The Lesson: A good financial advisor gets you thinking about how you frame your money. They can coach you on how to develop your own philosophy and best practices around spending and investing and create a realistic plan for your everyday finances and long-term goals. “I know now that I could have done both. I could have protected myself financially and still been an independent risk-taker. The key was to protect my finances first and then take the risks. In that order,” says Cynthia.

Pam Krueger is an investor advocate, personal finance journalist and author. She is also the founder and CEO of Wealthramp and host of the podcast, Friends Talk Money.