Saturday, September 10, 2016

The Number 1 Secret of Money

There are times I don’t want to write a particular article that won’t let me alone until it is written. This is one of those times. I recently read a news article linked from Ramit Sethi’s I Will Teach You to be Rich blog site that packages the simple truth that as been annoying me for the last week or two for the Millennial Generation. A young couple retired at age 30 with more than a million dollars in investments. Their big secret?

If you want to be rich, If you want to find financial freedom, if you want to escape debt, if you just want more money than you currently have, there is only one way up and out of your current condition.

It is true for a twenty year old high school dropout earning $9.00 an hour.
It is true for a billionaire hedge fund manager.


They found financial freedom at a very early age and people hate them for doing it.

Wealthy Thirty Somethings Doling Out Financial Advice Breed Online Hate

No matter who you are, you can’t escape the money equation.

Money In = Money Stored + Money Spent

To make the Money Stored term of the equation large, this young couple worked their way through school rather than loading up on student loans. They earned degrees in a field that is actually hiring college graduates (generally speaking, that would be one of the STEM majors or something to do with computers). Then they lived like paupers on decent middle class salaries, putting every spare penny into their investment portfolio until they reached the level of financial freedom that allows them to live the life they want to live.

Important things are simple.
Simple things are hard.

The easiest way to start on the road to financial freedom is to make a promise to pay yourself first. Put a predetermined percentage of your take home pay in a specified account that is at least a little difficult to access. Do it with an automatic debit. Hey, chances are you pay at least some of your bills by auto-debit, why not provide the same service for yourself. Just about all the authors recommend placing 10% of any funds that cross your palm in a savings account or an investment portfolio depending on your particular situation. If you view 10% as an insurmountable mountain, start with 1% and increase it by 1% every time you get a raise or a change in your life, like paying off your credit cards, gives you a greater amount of free cash. In the last years before I retired, I was placing 14% of my pretax income into my version of a 401(k) and most months investing as much as 30% of my take home pay. Hey, it took me forty years to get there. It wasn’t easy. I made mistakes along the road of life, but I made it. You can too.

And while I am at it, let me remind you of the second big money secret, avoid debt like the plague.

From the Devil’s Dictionary by Ambrose Bierce

Debt, n. An ingenious substitute for the chain and whip of the slavedriver. Ambrose Bierce

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