You’ve heard the stories of those seemingly lucky people who have retired young and really rich, and you’d love to do the same. Bill Edgar wants you to control your financial destiny, too, which is why he wrote the book, The Minimum Wage Millionaire: How a Part-Time After School Job Can Change Your Financial Life. The book is designed to help young people skip the school of financial hard knocks he attended.
“When I got my first job as a paperboy at 12 years old, I immediately took the money from my first paycheck…and bought a bottle of Coke and tons of baseball cards,” says Edgar in his book. “By the end of the week, all the money I’d made was gone. Back then, it wasn’t much, but today—if I’d just invested part of that somehow—I’d have enough to buy a small island in the Bahamas.”
Time is on your side and you have fewer financial responsibilities when you’re young, says Edgar, who urges those under 30 to take advantage of that fact.
If you’ve already completed these 14 financial moves, you’re likely to retire rich.
1. Set Up A Budget
Devising and sticking to a budget is the first step to building wealth. A budget enables you to live below your means, which is the only way to become a millionaire. Within that budget, you should have dedicated at least 20 percent of your income to saving.
2. Establish An Emergency Fund
Those who retire early and rich know that it’s not a matter of if you’ll need an emergency fund, but when. Life happens and you have unexpected bills because of it—even when you’re young. Your emergency fund should grow as you get older to cover at least three months’ worth of expenses if you aren’t able to work.
3. Save Automatically
Setting up automatic savings accounts ensures that you save no matter what, and doing so allows you to take advantage of compound interest. ” money makes money,” says Edgar. “This is why it’s so critical for you to start saving while you’re young. Over long periods, your money compounds—snowballing from just a few crumpled up ones to a massive truckload of Benjamin Franklins!”
4. Pay Yourself First
Setting up your automatic savings plan to occur at the beginning of each month before you pay any bills, ensures that you meet your savings goal every month.
5. Learn To Live Frugally
Most millionaires are unassuming and live below their means. “The media portrays an image that all millionaires drive Lamborghinis and Maseratis, wear Gucci shoes and Rolex watches, and live in 30,000-square foot mansions by the beach, but that’s not even close to the truth,” says Edgar. “They drive used cars, have average-sized homes, budget and save most of their income.”
6. Open An IRA
If you’ve opened an IRA and each year contribute the maximum allowed, you’re well on your way to being really rich. Roth IRAs allow you to save money now that you can take out later without having to pay taxes when you turn 59 ½ years old. You can also withdraw contributions from your Roth tax-free after the account has been open for five years.
All you need is a paycheck to open a Roth IRA, and you don’t have to be any particular age. Even kids can open one. If you’re under 18, you can open up a custodial account with your parents.
7. Create An Investment Plan
Most people work for money, but wealthy people have their money work for them. “Rich people don’t trade time for money,” says Edgar. “They create a plan to invest money to get a return without having to do any of the work. They find a good investment, put their cash in, and, if they’ve chosen well, they get more money back than what they’ve invested. They keep doing this over and over until they wind up with A LOT of money.”
From the many mutual funds available, Edgar encourages choosing investments from the S&P 500 index funds. Each of these funds represents a wide variety of companies and they tend to be diverse and steady in their return. Index funds also have the least expensive fees, which makes a big difference over time.
8. Don’t Panic
Stock market crashes and panics happen over time and are normal, says Edgar. “When something in the world occurs, many people may decide to sell, but never feel that you have to do what everyone else is doing.” He advises instead to stay the course and invest something with every paycheck.
9. A Career With No Financial Ceiling
Most of the wealth in the U.S. is made by entrepreneurs. “There are no employees on the Forbes Richest List,” says Edgar. “Not even a world-renowned heart-surgeon or a top-paid, super lawyer. All of the richest people in the world invest in making their money work for them because they know their earnings are capped if they just trade time for money.”
10. Seek The Help Of A Financial Mentor
Take the time to learn from someone who has successfully built wealth, after all, they are often the best teachers. You’ll likely retire young and rich if you sought and took advantage of such a mentor relationship and emulated the person’s successful financial moves.
11. Learn To Take Advantage Of Free Money
In addition to rarely paying retail and using coupons and rebates, young wealthy people also take advantage of opportunities to get substantial amounts of free money, such as signing up for a company 401(k) plan with a contribution match. Many such programs match your contributions by 50 to 100 percent, which can add up to massive bucks.
12. Write Down Your Financial Plan
Studies have shown that the key to accomplishing your goals lies in committing those goals to paper, and handwriting them is the most effective. Saying you want to be rich when you’re young, won’t work. You need a written workable plan that contains specific steps and actions on your part.
13. Use Limited Credit
Wealthy people know that irresponsible use of credit robs you of your financial future. You’ll retire really rich if you use credit infrequently and only when you can pay the balance off without interest.
14. Believe in Your Dream
The most important aspect of becoming really rich early in life believes that you can do it. Inspire yourself by reading about others who have done the same, and you’re likely to reach financial independence at a young age and live the life of your dreams.
Julie Bawden-Davis is a widely published journalist specializing in personal finance and small business. She has written 10 books and more than 2,500 articles for a wide variety of national and international publications, including Parade.com, where she has a weekly column. In addition to contributing to SuperMoney, her work has appeared in publications such as American Express OPEN Forum, The Hartford and Forbes.