Want To Build Wealth Someday?

Want To Build Wealth Someday?

wealth

Well, here we are fellow Millennials. The torch is being passed to us. Granted, it’s a cheaply made and outsourced torch that was heavily financed. Thank goodness the monthly payment is low!

Unfortunately (or maybe fortunately) this is the view that I have of the America that is being handed off to us. We are inheriting a country that has failed to educate its citizens on basic fiscal responsibility for decades. The public school programs for money management are a joke, and only a handful of kids even participate in those.

We live in a world where you can “afford” something if you can make a minimum payment, but barely any of us can actually buy anything of substance with our own cash (if we have any). For many people, building any kind of wealth seems like a pipe dream at this point.

We go to college for years, just to come out with crippling debt and bad spending habits. Our best answer is to ask for help from the government for loan forgiveness or some other ridiculous loan repayment program rather than suck it up and face our poor financial decisions.

We are so angry that the government has screwed us over by lending too much money to us! The sad thing is that this backwards thinking isn’t really our fault…it’s the culture we have grown up in. One of my life goals is to change that mindset, even if it is just for one person. Seriously. Even one would be cool.

Millennial Personified

I am the most stock Millennial ever. I went to high school in the early 2000’s, played a ton of video games (Halo was life changing for me) and then reluctantly went to college because that was what I was supposed to do. Duh.

Fast-forward 5 years. It took time, stop judging me. I have a Music Education Degree, and became a band director. Let me filter that down a little bit in monetary terms…I am a teacher. I make a teacher’s salary. Not exactly the best financial choice, but I liked music and I was really really good at band. Again, stop judging me.

The most important thing here is that I came out of college with $40,000 in student loan debt. My monthly payment was about $365 a month, and I paid between 6–7 percent interest on each of the 6 separate Stafford loans that I had, depending on the loan. This basically meant that it would be about 10 years before I even came close to dreaming about paying down those loans…but I really didn’t think about the negative implications of my loans too much when it came to building future wealth.

I figured I could make the minimum payment and be fine. Everyone else has loan payments too, right?

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Make the hard choices now so that you can build wealth later.

At some point in the very near future you will have to decide if you want to depend on your 401k and/or any existing government programs like social security (because they may not exist when we are old) to fund your golden years or if you want to build wealth through your own impressively awesome decisions that you learn from me. That’s right, you may be in your 20’s or early 30’s, but you better figure it out now. If you don’t get anything from this blog post, you need to get this:

FOCUS ON BUILDING YOUR WEALTH AT THE BEGINNING OF YOUR WORKING YEARS, NOT THE END.

Sorry I had to yell at you like that, but you needed it.

Our early money earning years are invaluable to us when it comes to building wealth. The most priceless item that all people have is time. The more time you have in life, the more opportunity you have to build your empire of wealth and prosperity. Take advantage of your money earning potential now.

My first bit of advice is that you pay off any debt that you have accrued through college as quickly as possible. It is insanely hard to build wealth when you have bad debt. (We will talk types of debt in later blog posts). My second bit of advice is that you sacrifice a lot of personal pride and spend less money than all of the people around you. They are probably poor.

You will have to make hard choices that go against most of society’s norms, and it will be totally worth it.

I do want to take this time to make it very clear that everyone has different situations in life, and not everyone will be able to do everything that I suggest because of those different situations. THAT IS OK. The most important thing is that you make a choice to not live like everyone else around you, and rack up debt with poor spending choices.

In the following section of this post I will tell you to do some things that you will not be comfortable with, mostly because it goes against everything you have seen from your parents, grandparents, and friends for your entire life. But let’s be real, most of them will not end up building real wealth, and you know it.

Wealth is a choice, and you should always look at it that way. You also need to be aware that if you sacrifice like I will advise you to do, your peers will temporarily pass you up in terms of nice cars, houses, vacations, etc. They probably borrowed the money for all of that stuff anyway. Don’t worry though; you will catch up and blow past them shortly.

Here’s what you do.

In short, this is what you need to do to start the process of building wealth as a young person:

  1. Throw every available dollar that you have at your student loans, or any debt if you have it. This may be the only investment that you will make a guaranteed return on in your entire life, and it is an investment in yourself. The sooner you have this bad debt paid off, the sooner you can start paying yourself instead of Sallie Mae.
  2. Don’t buy stuff, especially new cars. I still drive the same crappy car that I had since my first year of college, and you will see how much that has helped me start building wealth shortly.
  3. Figure out what delayed gratification is, and start believing in it right now.
  4. Pay as little as possible for housing when you get out of college until you are debt free. Live with your parents, live with 4 roommates; be homeless for all I care. THIS IS HUGE. Use this saved money to begin paying down your debt, which leads to….
  5. Once you are debt free, pay yourself the same amount you were paying towards your debt and be a jerk about it for as long as possible.

I did all of the things above, and you won’t believe what it has done for my financial life. I paid off all of my debt in a year and a half. That’s right, $40,000 in loans paid off on a teacher’s salary in that short of a time.

I stayed true to rule #5 afterwards and now have enough money to start my own company and start building even more wealth. (I realize that this last paragraph looks like an advertisment for one of those shady websites that promises huge returns with No Money Down!, but it’s not. I seriously started a real estate digital marketing company).

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Just in case you thought it wasn’t possible!

Live differently. Your bank accounts will thank me later. ~M$M

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16 comments… add one
  • Alyssa Feb 1, 2015, 5:04 am

    This is so incredible, thanks so much for sharing this I really enjoyed your post! Congratulations on being dedicated enough to drive down a large lump sum of debt in such a short time. I also appreciate that you brought up the time and delayed gratification aspects. Those two aspects are absolutely key for Millennials! Keep posting great things and I’ll keep reading. Great advice!

    -Alyssa at Generation YRA

    • Millennial Money Man Feb 1, 2015, 3:47 pm

      Thanks! I’m glad you liked it!!

  • Mrs. Marriage & Money Feb 12, 2015, 2:34 am

    I really like this post – super inspiring and absolutely true. However, can I ask what your cost of living is like where you are? $1300 twice a month is great, but it would be very hard for us to do that even with roughly the same salary as you (40K) since our rent + food + utilities costs around 2000. I know, we should move (haha that’s the easy answer, right?) but as graduate students we’ve tried to find a better deal than our apartment and just can’t, and until we graduate we are stuck living in the city.

    • Millennial Money Man Feb 12, 2015, 2:45 am

      Thanks for the kind words!! Check out this post that I wrote – http://millennialmoneyman.com/theartofsacrifice/ – it details everything that I did to be able to pay that amount towards my loans. I’m fully aware that the amount I paid monthly was crazy, and not everyone can knock out their debt the same way that I did. However, I really would like to pass on some of the concepts that I used to get rid of my debt to other people! Anyone can do what I have done, but maybe to different degrees. Let me know if you have any other questions!

  • Jacquelyn Mar 19, 2015, 5:12 pm

    Hey!

    I found your site through a few different things and I am stoked. I have really started getting into my own journey of destroying debt and it’s quite a feeling as I am just starting to gain momentum. Here is a bit about my story: http://studenomics.com/personal-finance/update-from-a-reader/

    I would definitely love to learn a little bit more about you and your ideals because now I am trying to figure out where I want to go post-debt. I am so focused on getting rid of my debt that I am left wondering…what do I do when it’s gone? How can I make sure I am not living paycheck to paycheck and can give myself the freedom to pursue more things? You get the idea and have obviously worked through it and I love it.

    Congrats to you!

    • Millennial Money Man Mar 19, 2015, 9:11 pm

      Thanks for reading! I’m an open book, feel free to ask questions. If you are as serious as it seems about getting rid of your debt, you won’t live paycheck to paycheck.

      • Jacquelyn Mar 20, 2015, 8:16 am

        Well, I am curious if you have multiple incomes. I obtained a part time job as money solely for my loans on top of the paycheck I get now, but I know I could still put more toward it.

        We are having a hard time determining if it would be better for us to tackle one loan together or our loans separately since we aren’t married. We would definitely get rid of overall debt faster because her interest rate is 8% and mine is the unsub direct debit 6.55%

        Also, I am curious…as we do want to give up cable but it’s tough to find a place that has reasonably priced internet…did you give that up too?

        • Millennial Money Man Mar 21, 2015, 9:33 am

          When I was paying off my student loans, I did not have multiple income streams. I am starting to now because of this website…but it will take some time before it’s substantial. The fact that you got another job means you are serious about taking care of your debt, and that’s freaking awesome.

          The marriage part is tricky. I obviously don’t know anything about your situation, so I will leave the legal issues out of this answer. Whatever loan amount is smaller should be tackled first, regardless of interest rate. That means you would make the minimum payment on the bigger loan and huge payments on the smaller loan. Once the smaller loan is paid off, you combine the larger payment with the minimum payment and pay off the bigger loan very quickly (in theory). It’s called debt snowballing, check it out here:

          http://www.daveramsey.com/article/get-out-of-debt-with-the-debt-snowball-plan/

          I never gave up internet because it was essential for my job and to run this website. Even if the internet only option is expensive, it is probably cheaper than cable + internet combined. I would drop the cable as soon as possible, apply that amount to my loans, and get it again later. (But I still wouldn’t get the cable…I’d rather my net worth look better than see who wins X-Factor).

          • Jacquelyn Mar 21, 2015, 10:52 pm

            Yeah I have done a mix of snowball and avalanche. I got rid of my credit card debt in February and am taking out my smaller student loan in a week.

            I just know, if we combined our income, we could destroy the one loan that is a variable private loan, which is why I won’t that one gone. I am “lucky” to have fixed loans through the government. I anticipate to have us debt free by the end of the year.

            Private loans are very conniving and I hate it. I do love Dave Ramsey, I have been listening to his podcast like crazy and love it. We have 4 loans right now, 3 are mine ranging from $7000, $7200 and &7700. The other one is the private one at 7020. I just think that getting rid of the private loan is the best because …they have a lot more freedom to spike rates.

            I am anxious to see my personal capital number NOT in red and in …whatever color a positive net worth is. I do love your stuff and am thinking I am going to document my journey more too. So many of my friends (and family) are unaware of things and live in oblivion. It makes me nervous knowing I was comfortable living with debt.

            • Millennial Money Man Mar 22, 2015, 9:01 am

              Congrats on getting rid of your credit card debt, that is a huge accomplishment! If you both feel comfortable combining your income to take out the loans, I’d go for it. Also, since all four loans are about the same amount, taking out the one with the unpredictable interest rate isn’t a bad idea at all. It’s really a 6 in one/half dozen in the other scenario. You’ll probably come out the same either way, but it’s important that you feel good about what you are doing.

              Yes – people are totally unaware of the long term effects of debt like student loans and credit cards. The good news is that you aren’t one of them. You’ll be debt free soon (it’s awesome), I’m rooting for you!!

  • Rocky Apr 2, 2015, 8:26 am

    I love your content! This is an enormous message and you are telling it in a powerful way. Keep up the great work! These are things I have “known” for a long time, but failed to act on them. So most of my adult life has been spent undoing poor financial decisions. However, there is joy in sharing this powerful message, and I can hear it in your writing. I wish you the best and I will highly recommend your site.

    I love #5 above: Once you are debt free, pay yourself the same amount you were paying towards your debt and be a jerk about it for as long as possible. -Great stuff!

    • Millennial Money Man Apr 3, 2015, 8:26 am

      Wow, I definitely appreciate the kind words. I DO love writing about finances, glad you could tell!

      Acting is definitely the hard part – especially for people my age. The only reason I am debt free is because I decided to act on the advice that I was given by others. I think a lot of people know the information I am giving…they just have to jump in and get started.

      Thanks for reading!

  • Mr. Enchumbao Apr 5, 2015, 8:25 am

    Great job on getting rid of debt! This is very good advice and not just for millenials but for everyone who needs financial tips on becoming wealthy. Keep it up!

  • MB @ Millennial Boss Jan 2, 2016, 3:57 pm

    Thanks for the wake-up call on the guaranteed return on paying off the student loans. We are contemplating using some cash we have on real-estate but have the option to pay off the fiancé’s student loans at nearly 7% interest. Tough choice but I’m leaning towards loans right now.

    • Millennial Money Man Jan 2, 2016, 6:59 pm

      Tough call, if you think you can outperform the 7% (which is easily possible if you are considering a cash on cash return instead of calculating the total financed amount’s return) then you could go either way.

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