I read a blog post elsewhere that was giving advice to those starting out in their first job after graduation. While I think it’s good to counsel young people on how to budget and not make terrible financial mistakes, it seems we do more damage by not telling kids they have options for their future other than working for a paycheck until they are 65-75 years old, then they can retire.
Get a job. Save 10%. Contribute to your employer’s retirement plan. Keep your expenses lower than your pay.
This “plan” failed and contributes to why we have people today working when they should be enjoying their retirement. It pains me when I see folks in their late 60s and 70s working retail jobs to make ends meet. But these are the people who got by every month.
Better yet, we should be showing kids how money can be used to build real wealth but they will need to save most of what they earn and learn to invest in income-producing assets. Save 10%? Why not save 50%? Starting with a zero budget, figure out a way to live as cheaply as possible, not comfortably. Live at home with your parents, find roommates to share an apartment, or rent a room. Don’t sign up for cable or dish, don’t rush out and buy a new car with a loan, and don’t eat meals at restaurants. Live as simply as you can but have a goal.
Work hard to build your career and increase your earning power, but work just as hard to save the largest percentage of your income as you can. Invest it all. Sock it away in index funds, or buy rental houses that provide cash flow. Participating in your company’s retirement plan is only a small fraction of your wealth building needs. Learn about taxes and how to lower your taxes. If you have student loans, come up with a plan to pay them off. Get educated by reading everything in the library and talking to people who are financially secure. Not the people driving the flashy cars, but the “Millionaire Next Door” type.
Pay yourself the biggest chunk of your paycheck every time. And do this consistently. Make it automatic. Don’t buy in to everything your friends or society tells you to get. Plan for your future (and your future family’s future). Don’t think in terms of this year and next year, think in terms of decades. Buying a fancy phone might be fun for now, but don’t gamble with having a secure future.
Start early. Work hard. Save harder. Invest smart.