It is rare I see young adults that have a heightened sense of urgency to prepare for the next level. I will not lie, as a 21 year old I often have the mindset that I have all the time in the world. I have more than enough time to “figure it out” and “get what I want”. What I find important to keep in the front of my mind is that young adults have something even Warren Buffett cannot buy: time. Time is the only treasure most of us start out with in abundance, and let me tell you, they are not making any more of it. Let’s make the most of the opportunities we have today, because there will soon come a day when time is not quite as ubiquitous.
Want to be wealthy by the end of your life?
Learn early in life how to defer gratification. The
ability to resist temptation for an immediate reward, such as blowing an entire
paycheck on one night out, is a challenge. Self-control is like a muscle, the
more one uses it, the stronger it gets. However, if one never practices
self-control, it becomes weaker and weaker.
The “Marshmallow Theory,” based on a widely publicized
Stanford University experiment, has been a landmark in the ability to
demonstrate the power of self-control in individual’s financial and personal
lives. The experiment followed the actions of children who were left alone with
a marshmallow and told that if they did not eat it they would get another one
in 15 minutes. Some children waited the full 15 minutes, some ate the
marshmallow immediately, and others ate it somewhere in-between. Years later,
researchers tracked down the same children and found that those with the
willpower to wait the full 15 minutes (one in three), grew up to be more
successful adults than those who ate the marshmallow immediately, including
higher SAT scores and higher-paying professions. Do not eat the marshmallow.
We need to learn to take as much pride in not owning
something as owning something. What is even more of a challenge is seeing the
aforementioned funds having any ability to make you wealthy; it will. A
one-time investment of only $5,000 when you are 25 will grow (@8%) to well over $75,000 by the time you are 60. To
put that in contrast, to have the same amount when you are 60 you would have to
invest over $24,000 at the age of 45. We
have the advantage; (Pre-tax basis, assuming 3% inflation).
We cannot wait for luck to make us rich. Wealth does not
come to us, it does not look for us, we need to go get it. How? By living
below our means. Be proud of a simple lifestyle, wear it on your shoulder;
pay yourself first and build up your wealth. The first step to fully embracing
a frugal lifestyle is to ascertain what areas of your life you need to cut back
on. The easiest way to do this is to keep
a budget. Break it up on a weekly, monthly and annual basis; that $2.50 a
day on coffee may not seem like a lot, but $2.50 a day invested on a pre-tax
annual basis would return over $180,000 35 years later (assuming 8% rate of
return). It is also important to keep in mind that the best things to spend
time and money on at a young age are experiences; you’ll sure remember that
camping trip you took with your best friends a heck of a lot longer than that
night you blew $200 at a bar.
Those who plan for retirement will succeed in prospering in
it. Writing down your goals or your plans has no magic in its own, but those
who document what is important to them at an early age are more likely to identify
where they are, where they want to go, and how to get there. This will help hold
you accountable.
The happiest people out there are not those who are sitting
back on a beach doing nothing productive with their lives. They are those who
have determined for certain, at a young age what is important to them, and have
done those things throughout their lives. Those who succeed know that all the
“tomorrow” may not be guaranteed, and for that reason excitement cannot be
completely pushed off. Let’s do everything we can to identify our passions,
dreams, and goals, and then find ways to make those dreams a reality today.
-Luke
No comments:
Post a Comment