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“Guys i m phil town from rule. 1 investing it today i want to talk talk to you about something dear to my heart. What s the best way to when you re young you re in your 20s. When it comes to investing the earlier you start the better compounding works in such a way that your money grows exponentially on itself.
And what that means is that a person who starts investing just a few years earlier could end up with many times more money when it comes time to retire than they would if they just started later in life now. If you re in your 20s. And you re wanting to get a head start on investing here are a few tips to help you out okay first what you want to do is learn to invest ah big surprise right so you re gonna have to figure out how investing is done you got some choices here right. And i ve kind of gone through an awful lot of the things you re gonna have to look at so let me just give you some advice from about what 35 years of doing this there is a family of investors.
It started with ben graham and then to warren buffett and charlie munger down through these teachers down to me and from me to thousands of students about a a kind of investing strategy. That is the best in the world this is where the millionaires and billionaires come from it s a strategy you can use whether you re starting your own business. Buying a franchise or building. One whether you re buying the house next door to rent it this strategy of investing.
We call rule number. One investing is the strategy in the world. That you should learn as early as possible so. That you have your whole life ahead of you to compound money.
Now once you ve learned something about how to invest then you want to start getting control of your cash. So the first thing you got to do is pay off that student debt right now student debt is such a common burden for people in their 20s and i want to apologize to you from my entire generation for screwing all you guys on your college tuition. If you still have outstanding student debt paying it off should be your primary investing goal. It s a real shame.
Because i ll tell you man when i went to college. It was a really a lot cheaper and since then the cost of living hasn t been about three percent per year colleges have gone up at eight percent per year..
And i know that doesn t sound like that big a difference. But it s the difference between going to school for a thousand dollars a semester versus going to it for twenty thousand a semester in the same way that sound investments grow your wealth exponentially this debt. That you ve had doing is also increasing exponentially and it grows. Larger and larger as the years go by it s brutal and i feel for you so.
Before you wade into the stock market just got to get out from under that burden every way you can think of it just start by eliminating that debt because it s gonna hold you back in the long term third get into some form of retirement account. There call. It a qualified accounts. You ve got a company.
401k plan. Where they match your funds. That s an okay one i m not a super fan of that unless of course they allow you to invest your money any way you want to and more and more of them are doing that but if you re in a 401k program. Where they match and then you re forced to invest in mutual funds.
I m afraid that within the next couple years. You re gonna be giving it all back so i would strongly urge you to invest where you can get control of where that money is going in some place other than mutual funds. I would put it into a roth ira or a regular ira. Where you re managing.
The money. A roth is fantastic. So 401ks are great if they re going to match and match and match. And all that but man once they ve matched then you re in this ridiculous.
Investment with a roth man alive they re fantastic because you pay taxes on the money before it goes into the roth. But then you never pay taxes on the growth of that cash..
So i ll tell you you know you got a roth ira. And you ve got a regular ira. The key thing is you get your money into a place where you can control it and you have the ability to pick and choose your investments using the principles that ben graham and buffett and munger have taught us and that way you re going to get the maximum returns as for why. And a roth ira is preferable for individuals in their 20s as opposed to let s say.
A traditional ira raus require you pay the taxes on your contribution. First right and you re in a low tax bracket of your 20s typically so people in a higher tax bracket in their 50s maybe should use a regular ira because they might be paying 35 or 40 percent tax. But if you re paying 20 tax. You want that money in an ira to grow without taxation on it ever v.
Create a budget and set savings goals. This is really important and i am the wrong person to teach you about it i have the worst budget of the planet and horrible at savings goals so if it s any consolation you can still get wealthy even without doing this however when i first started. I didn t have a budget. But i had a discipline of living on very little money and that is kind of what i m talking about here creating a budget.
So that you are forced into a limited amount of spending and sticking to it is one of the things that s going to help you get disciplined about your investing. So here s what i would suggest from every single paycheck designate a certain percentage. That comes out right off the top in other words pay yourself first and i know you ve heard that everybody s heard that but it s really important that you do it in your 20s because those dollars. You re saving and putting away in your 20s money that i know you could live on it.
Better you could have a better car you could have better clothes you could take some trips that you want to take. But that money that you re putting away oh man that turns into millions of dollars later on if you don t think. That s important let me just cue you up here warren buffett was in an elevator going up with a bunch of insurance guys. And one of these guys said they were watching buffett looking at a penny on the floor of the elevator.
And he said. I was wondering if buffett was gonna bend over and pick up this penny right this billionaire and he didn t do it..
He didn t pick up the penny. And this the doors opened up buffett stepped out then he looked back at these guys before the doors closed. He reached out and picked up the penny. And he just held it up like this he went beginning of the next billion.
The point is that buffett understands the power of compounding understands the power of a little money in today. What that means 30 or 40 years from now is millions of dollars so setting a budget. Very important to get the money into an investing account before you spend it so in addition to setting a budget that includes the money you re gonna pay yourself first you also want to set specific investment goals how much money do you want to have invested by the time. You re 30 right how much can you see pulling out keeping the belt tight keep it focused because that money is going to make very.
Rich someday. And how much money do you need to invest each month or each year in order to achieve that goal if you set a savings goal and you push yourself to achieve it you re gonna find it much easier to stay motivated and push yourself further and i would say this if you are having trouble figuring out what s the best way to go lean towards just saying. I m gonna put 10 of the money that i make goes right into the kitty goes right into my investment account right off the top and just stick with that 10 every time so let me give you an example of how important. It is to to to put money aside.
Now and invest it let s say that you are going to go through you know you re gonna double your money 20 times over a course of a lifetime all right so you got a thousand dollars. Now and you re gonna double. It 20 times all right let s just walk through this thousand dollars. Is 2 4.
8. 16. 32. 64.
Thousand right one hundred twenty eight thousand two fifty five hundred thousand a million that s ten doubles two million four million eight million 16 million 32 million 64 million. Hundred twenty eight million three hundred and whatever that is 250 million five hundred million 1 billion..
Dollars. So a thousand dollars double 20 times is a billion dollars. Now think about that for a second. If you take this thousand dollars and instead of putting it away.
Where you could double it 20 times in your lifetime. Like buffett has he s done much better than that actually you just took a thousand dollars. And bought a refrigerator with it. And that refrigerator 30 40 years.
Later cost you almost a billion dollars. So the power of compounding is crazy in terms of making you. Wealthy yeah you might not double 20 times. There you only double ten times.
It becomes a million dollars you really want to give up a million dollars to have a refrigerator. I don t think so so now i d love to hear from you guys do you have investing goals set for yourself. Maybe you should so leave a comment below with your answer. And i ll be sure to follow up with you and thanks for watching you guys now go play.
So if you enjoyed this video. And you feel it was valuable and teaching you more about investing. When you re young hit the like button and please share this video with your friends if you want more investing content subscribe to my channel and don t forget to click the button on the screen for a free gift. ” .
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