Warren Buffett once said that his financial success came as a result of his ability to "stand on the shoulders of giants," referring to his desire to learn from the decisions of others, good or bad.
Although our Foolish contributors might not be giants -- we don't hire by height -- their combined experience may help you make smarter decisions about your money without having to learn any lessons the hard way.
Below, five contributors share the smartest financial decisions they have ever made.
Jason Hall: The smartest financial decision I ever made was actually a product of the dumbest one. In my early and mid-20s, I cashed out almost all of my retirement savings, because I was too dumb to understand how much that small amount of money could grow in the 40 years between then and my retirement.
Luckily, I came to my senses a few years later, and made a concerted decision to really crank up my retirement savings around age 30, and a decade later, I'm still putting a large sum into my 401(k) every single year. This is the smartest financial decision I've made to date because it will let me benefit from the decades of stock market returns I still have available to me between now and my retirement.
Here's a little math to demonstrate how important putting money in early is:
Based on the 10% average annualized rate of return of the stock market, every $1,000 I contribute now -- about 25 years from retirement -- would be worth $11,000 when I retire. On the other hand, if I were to put off contributing until closer to retirement, I'd have to come up with a lot more cash. If I waited to age 50, I'd need to contribute almost $4,200 to get to the same $11,000 at age 65.
The bottom line is, I know I'll be in much better shape when I retire by investing as much as I can early, instead of scrambling to catch up when retirement is just around the corner.
Jordan Wathen: The single smartest financial decision I ever made is to admit to myself that I have an organization problem. I'm not nearly as organized as I should be, which meant I was letting a number of important financial goals slip through the cracks.
Admitting that I had a problem was the first step. The second step was making the conscious decision to take financial tasks out of my own hands by automating things as best as I could. I spent a couple of hours one day automating the payment of every routine bill, setting up automatic and routine transfers from my checking into savings, and from there, automating a portion of my savings to retirement.
It was a small change, and a very insignificant one in the grand scheme of things. But it has had a dramatic impact on my financial (and mental) health because I no longer wonder if I remembered to pay the Internet bill, or if my payment on my credit card is due on the fourth or fifth of the month. There is a lot to be said for minimizing the amount of decisions you have to make each day. A small time investment to automate every facet of your financial life will pay dividends for years to come. It's easily the single smartest decision I've ever made -- I just wish I had done it sooner.
Selena Maranjian: The smartest financial decision I ever made was to start keeping a significant portion of my assets in dividend-paying stocks. Dividends are great because when paid by healthy and growing companies, they'll keep being paid, no matter what the economy is doing. They'll also keep being paid no matter how I'm doing financially. There have been periods when my earnings from work didn't allow me to contribute much to my retirement accounts, but I'd see those accounts grow larger anyway because they were receiving dividend dollars.
Better still, dividend payouts tend to be increased over time. Imagine you have $200,000 invested in a portfolio that generates $4,000 in dividends this year. That's an overall yield of about 2%. If those payouts are upped by an overall annual average of 5% over a decade, they'll top $6,500 in 10 years. Dividends don't officially offer inflation protection, but they do often grow at a faster rate than inflation, which can be very welcome in retirement.
And speaking of retirement, dividends can serve you very well there. While annuities are compelling possibilities, they don't offer as much in low interest rate environments such as the one we've been in. But you can augment your Social Security (or other) income -- that recently averaged about $16,000 annually for retirees -- powerfully with dividend income in retirement, without even selling stocks.
Brian Feroldi: Ever since I graduated from college and became responsible for paying my own way in life, I've been fanatical about tracking my expenses and budgeting accordingly. While there are plenty of free tools available today that can make that process easy, I've always been a big fan of using a simple spreadsheet and manually entering the data as I go. While this is a time-consuming process, I like that doing so forces me to relive every single expenditure my family makes so we end up thinking twice about where every single dollar goes.
Better yet, the process of budgeting has helped us greatly in planning for our future and finding many ways to save as my wife and I regularly review our budget to find areas that we can cut back on our spending without crimping our lifestyle. Every extra dollar of savings we find is immediately allocated toward our investment portfolio, and those savings really add up over time.
Tracking my expenses and budgeting has been by far the best financial decision we have ever made, so if you're not doing so today, I think you should start doing so immediately. That's especially easy nowadays since there are so many free tools available that make the process simple. I'd bet almost anything that if you were to review your spending on a monthly basis, you could easily find ways to cut back without hurting your lifestyle one bit. If you did so and simply put the difference into something like the Vanguard S&P 500 index fund, I'd wager you stand a solid chance at earning 8% or more over the long run.
Brian Stoffel: When my wife and I were in our late 20s, we were living in Washington, D.C., teaching at charter schools. At the time, just after the housing crash, we considered buying property in the District. We loved our jobs, we loved the city, and almost all of our friends had already bought their first houses.
In the end, thanks in no small part to the writing of Fool Morgan Housel, we decided to wait until we were ready to start a family. We took the money we could've used immediately on a down payment and bought shares of three of our favorite companies. Even after the market's 2016 swoon, those particular investments have more than quintupled!
Then, over the next 12 months, something unexpected happened: We both totally burnt out on teaching and became disenchanted with living in such a fast-changing city. If we had bought, we would have either had to continue doing something we no longer felt passionate about, or been forced to become long-distance landlords. Neither of those options was appealing to us. Instead, we moved part-time to Costa Rica where -- seven years and one daughter later -- we are now building our first house.
No matter your circumstances, the takeaway message is simple: A house is a great emotional and social investment, but don't buy one solely as an investment.
Brian Feroldi has no position in any stocks mentioned. Brian Stoffel has no position in any stocks mentioned. Jason Hall has no position in any stocks mentioned. Jordan Wathen has no position in any stocks mentioned. Selena Maranjian has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days.