There are two key numbers that largely determine how much money you'll end up with when it comes time to retire.

  • How much you earn.
  • How much you spend.

Absolutely critical to your success is to make sure that the first number is larger than the second one. That's true whether you're an executive earning a high six-figure salary or you're just starting out after graduation. If you spend more than you earn, you'll never get ahead, no matter how high your income.

Press your advantage
Remarkably, when it comes to building wealth, someone just starting out actually has a tremendous advantage over someone older who earns a much higher salary. That advantage is time. Most wealth is built over decades, through the long-term power of compounding. Assume an average 10% return. If you start at age 18 and invest $1,000 a year -- less than $3 a day -- you could wind up with nearly $1.2 million by the time you turn 67. For a 50-year-old to get to the same point by the same age would require an investment of more than $26,000 a year.

Whether you're just starting out and have the power of time on your side or you're further along in your career and can bring more resources to the table, the need is still the same. You have to save and invest money now to have money later. The sooner you start and the more you save, the better off your future will be.

Hide your cash
Unfortunately, it's easy to spend as much, if not more, than you earn. There are always temptations to trade up to a higher-priced option, whether it's food, cars, houses, televisions, computers -- whatever. That's why paying yourself first is so important. By taking money out of your paycheck as soon as it arrives -- if not before -- you eliminate the temptation to spend, since you never really saw the money in the first place.

How to do it
The easiest way to get started is to start contributing to a 401(k) or 403(b) plan if your employer offers one. Once you sign up, money will automatically come out of your paycheck and be invested on your behalf. If you're really fortunate, you'll also get a company match -- essentially free money courtesy of your boss. Best of all, in a traditional 401(k) or 403(b), your contributions are tax-deferred, so you'll save on your current income taxes.

With a long time horizon, you should consider investing most of your money in stocks or stock funds. If your plan allows you to put your contributions into an index fund -- such as one that tracks the S&P 500 -- even better. Not only will you be investing in a fund that typically beats the majority of its actively managed brethren, but you'll also get a healthy shot of diversification at the same time. Consider the wide variation of industries in the table below.



Market Cap

Abbott Labs (NYSE:ABT)


$72.1 billion


Power Production

$14.7 billion

Allied Waste (NYSE:AW)

Waste Services

$4.9 billion (NASDAQ:AMZN)

Internet Retail

$17.6 billion

American Express (NYSE:AXP)

Consumer Finance

$71.6 billion

Anheuser-Busch (NYSE:BUD)


$36.1 billion

Archstone-Smith Trust (NYSE:ASN)

Apartment Real Estate

$12.5 billion

With companies operating in businesses all over the map, it's a pretty decent start at a broad-based portfolio -- without even leaving the As! Plus, with so many market caps measured in the billions, it's largely made up of companies with legitimate heft and staying power. There are 493 other companies you'd own right along with those, too -- just by buying that one fund.

The clock is ticking
Remarkably, that's all it takes to wind up on top in the long run. Your two keys to success are the ability to sock some money away in a solid investment plan and the time to let it compound. For most people, the toughest part is figuring out how to free up the cash to get started. That's where my friends at Motley Fool GreenLight can help. Advisors Dayana Yochim and Shannon Zimmerman excel at helping you find the fortune hidden inside every paycheck you earn.

Once you find your hidden fortune, you can start investing for your future. Remember, though, that time's ticking away. The longer you wait, the more you'll have to sock away each month to wind up comfortable in the long run. To help you begin your journey on the right foot, take the next 30 days to check out GreenLightabsolutely free. You've got nothing to lose and your financial security to gain.

At the time of publication, Fool contributor Chuck Saletta did not own shares of any of the companies mentioned in this article. is a Motley Fool Stock Advisor recommendation. Anheuser-Busch is an Inside Value pick. The Fool has a disclosure policy.