Creating Sustainable Wealth While Still in Your 20s

Creating wealth is largely a function of time. The sooner you take actions to create wealth, the more likely it is that you will achieve it.

Aug 17, 2014 at 2:00PM


Source: Flickr

Many people think that achieving wealth only happens in later stages of life when they have attained a good education and established themselves in their careers. After many years of hard work you might be able to retire or go on that trip around the world.

However, the accumulation of wealth is not happening in an instant -- it is a process that requires understanding, discipline, and action.

Many people appear to underestimate the aspect of 'starting early.' The sooner you start putting yourself into the right mind-set, the sooner you start saving and putting money into equities, the sooner you will reach financial independence and the levels of wealth that you desire.

Unfortunately, financial illiteracy is a big problem in America as well as in other Western countries thanks to the levels of prosperity the generations before us have already achieved. We take way too many things for granted.

But, putting you in the proper money mind-set is paramount in making sure, that you have a realistic shot at becoming wealthy. While a lot of discipline and hard work will be required, understand that the easiest thing you can do to become wealthy, is to start saving money while you are still young.

1. Discipline
Saving money is an exercise in discipline, nothing else. You will feel a lot of temptations to spend money on a lot of unnecessary things, but understand that saving is a way of investing in yourself.

Reaching financial independence and having the freedom to do as you please is much more valuable than buying the latest electronic gadgets.

2. Understand the power of compounding
This is a key concept in wealth building that many young people disregard. But understanding the value of regularly reinvesting interest/earnings is a sure-fire way of creating wealth.


Source: Vanguard

Assume an investment of $10,000 at the beginning of the investment period (which can span for 40 years or more when you are in your 20s) and that you get paid 6% interest.

If you withdrew your interest income annually from your investment account, your ending value will, of course, be $10,000.

On the other hand, if you reinvested all your interest income at the assumed 6% interest rate, your investment portfolio value would have skyrocketed to more than $102,000 after 40 years.

This is the demonstrated power of compounding.

3. Stay out of debt
This should be fairly intuitive, but unfortunately it isn't. Many people live way above their means and actually slip into debt at an early age.

Understand that our society glorifies consumption and doesn't view debt as a bad thing.

But it is. Nothing kills dreams and financial independence more than consumer debt. High-interest rate credit card debt is especially toxic for your financial future and should be avoided at all costs. Remember: Rich people earn interest, average people pay it.

The Foolish Bottom Line
The biggest advantage you have to setting the foundation for sustainable wealth is your young age. Start saving and investing your money on a regular basis when you are in your 20s when you don't have a lot of expenses to cover. Make sure you have a solid understanding of the concept of compounding.

Watching your savings grow on a consistent basis can be very empowering and satisfying, too. If you want to accomplish your dreams, whatever they are, start saving today and stay as far away as possible from any form of consumer debt.

How to get even more income during retirement
Social Security plays a key role in your financial security, but it's not the only way to boost your retirement income. In our brand-new free report, our retirement experts give their insight on a simple strategy to take advantage of a little-known IRS rule that can help ensure a more comfortable retirement for you and your family. Click here to get your copy today.

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4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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