Financial advice for current 18 year olds. How should we begin to accrue our wealth?
Hello, I am turning 18 this year and I am thinking of ways to be more financially independent. Moreso what steps I should be taking at this age to build and compound my wealth for the future. Let me know! #finance #money
Your biggest asset when you are young is your time and you will trade your time for money when you get a job. The amount you are paid is based on your talent and skills. These can be improved through practice and education. That is why it is so important to continue to to learn and get formal education throughout your life. It is directly connected to how much your time is worth and therefore how much you will be paid when you sell your time to your employer.
Wealth is built through discipline and self-control and most people are not very good at it. But it is a skill to be learned and practiced. It can be mastered if you want it bad enough.
Take home pay check $1,000
SAVINGS @ 10% ($100)
Budget to live on $900
If you can do this starting at 18 years old, you will be a millionaire by the time that you are 40.
Try it. You have nothing to lose and EVERYTHING to gain.
Matthew recommends the following next steps:
Do not spend all or overspend your paycheck.
Biggest wealth killers are: more car than you need, more apartment/house than you need.
Having a roommate is a great way to save early.
NEVER carry credit card or other consumer debt.
Keep track of your spending.
Save up for big purchases so you can pay cash.
As others have said, pay your savings first and consistently.
While it is heavily debated if Einstein actually said that, the lesson here is a very true one. When you have the ability to invest early in life, you have the flexibility to take larger risks relative to those starting later.
A great low cost option would be a passive index fund that diversifies your risk across a broader index of stocks and keeps long term compounding fees low.
Setting up a recurring deposit into a saving account, is a simple and painless way to start. This way everything is automatic and you will be pleasantly surprised whenever you periodically check the balance :)
Good habits and access to help will let you go farther so work on those along the way as well.
Mohamed recommends the following next steps:
When I first started working, I began contributing a very small amount to my 401K. Over time, as I received salary increases, I also increased my 401k contributions.
Live within your means, limit credit card debt, and save what you can.
There have already been so many wonderful answers so I'll just try to echo the ones I feel the most strongly about:
* pay yourself first! Savings needs to go in every paycheck no matter what
* try to leverage an IRA and/or 401k as much as possible. Ensure you're getting the maximum match from your employer if offered!
* try to keep some liquid cash in a default savings for impromptu expenses like needing a new car, moving to a new city etc. Seeing this "secondary" savings get depleted for emergency uses won't be as unnerving since your primary vehicles will continue to grow!
I would recommend you save some of your income and begin to invest in low-cost index funds to begin.
It is great that you are thinking about saving money at such a young age. There is a reason we say "the time value of money."
I am on the younger side myself, but I honestly did not know anything about Roth IRA accounts or 401ks until I started working. Four years is not a lot of time, but for those retirement accounts, it is. Get yourself a plan for retirement so that can count toward your savings.
Also do a periodic payment into a brokerage account, and then invest it in a passive investment like the S&P 500 or a sector ETF. Once again, you have so much time that the money will grow tremendously, even in five years.
Outside of that, do not live outside of your means and save wherever you can. Then you will be golden.
Best of luck!
I am glad to hear that people at your age are thinking about this question, because it is better to plan early.
1. You should live below your means.
2. Do not spend all the money you can make
3. Share costs as much as you can i.e. roomie, etc.
4. You must not consider credit card as an extension of your paycheck
5. When you have debts you must pay the most expensive in terms of interest rate
6. Be strucured in you income vs your expenses
Hope this helps and Gook luck.