It’s never too late to set yourself up for success if you’re willing to put the work in. You can learn how to build wealth at any age. Too many people are telling you if wealth isn’t passed down through the generations, you have no chance. That’s simply not true.
There are books like Everyday Millionaire and The Millionaire Next Door, that prove creating personal wealth is accomplished by people working average jobs. These people are not top income earners and are simply good at the principles we’re going to be covering.
Over 80% of millionaires are first generation. You can take the information they used to get there too.
You Can Learn How To Build Wealth At Any Age
I remember an economic teacher telling me one time that $100 per month can make me a millionaire. That simply blew my mind and got me on the track to investigating it further. If you’re in your 20s or know someone who is, make sure they know this is the best time and get them a link to this.
Here are some things to keep you on track depending on what stage you are in life.
Start Saving Money
Saving 15-20% of income in the 20s is tough because of all the things going on in life. First, of course, is to get a job. A steady paying job.
Be careful and don’t create too many strings that pull on your wallet. This is true, especially if you’re right out of college or trade school.
Get in the habit of living below your means. Don’t dream about fancy cars until you get your money saving and investing strategy underway. You’re learning about how to get your money saving strategy underway properly right now. It’s a discipline that includes knowledge and proper action steps over and over.
It’s simple yet hard to do because there are too many people and things distracting you from good intentions. It’s really easy to get derailed and the sad thing is most people never get back on track.
Invest In Yourself
You’re doing that now by reading this. Should you spend money going to night class to get a higher paying job? You know how much money it takes to live comfortably. The reason I’m bringing this up is to ensure you can save 15-20%. Make sure car loans aren’t keeping you from saving money.
Read books about building wealth. An outstanding example of a money mentor other than Guiding Cents is to tap into Dave Ramsey and listen to his podcasts. He’s helped me tremendously, and we know his principles are sound and proven. I would recommend nothing or anyone with whom I don’t have faith in.
How To Buy A Car
When buying a car put 20% down and only finance it for 3 years. It’s probably going to be used. Until you can get your savings where they need to be, the cost of that car or truck payment should not exceed 8% of your gross income.
It’s the 20-3-8 rule. Peg this to memory and apply it for the rest of your life.
The splendid news is that eventually most people will pay cash for their cars, breaking none of the savings rules you’re being taught right now.
Become Addicted To Watching Your Money Grow
Most of the time we hear the word addiction, we think of something negative. Fully embrace the feeling of joy when you save money. When you see that deposit going into your savings, whether a regular savings account or a modest investment fund, feel the joy of the increase.
Get into an employer match program if you can. Make sure it’s a fund or account you choose and not attached to the company you work for. In other words, if the company goes bankrupt, then it won’t hurt your account.
It’s ok to have an employee stock program, like I did with United Airlines before we went bankrupt in 2004.
But keep in mind it should be beside your regular savings account. In my case, a $130,000 ESOP (employee stock ownership program) turned into a $1,000 payout after the bankruptcy filing after the 9/11 attacks. That single event shook the entire airline industry. A very sad story.
Use The Law Of Compound Interest
Albert Einstein said that compound interest is the most powerful force in the universe. He said, “Compound interest is the 8th wonder of the world. He who understands it, earns it; he who doesn’t, pays it.”
Use this compound interest calculator from the official United States Government website to run some numbers. https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator
If you use the average rate of return of the S&P 500 over the past several decades, you will get a good idea of the fantastic future gains for yourself. The S&P 500 Index originally began in 1926 as the “composite index” composed of only 90 stocks. According to historical records, the average annual return since its inception in 1926 is approximately 10%–11%.
How Can I Start To Build Wealth From Nothing?
A good rule of thumb is to always be saving a minimum of between 3-4% of your gross income annually. If you’re right out of college and in your early twenties, try to save $250 per month as a minimum. A little goes a long way.
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