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From Broke Grad to Multimillionaire

9 Ways to Build Personal Wealth

Graduation is here – FINALLY – and mixed in with your cap-tossing elation is a healthy dose of fear. It's all up to YOU now. How will you support yourself in an uncertain, ever-more-expensive world? Your financial anxiety is understandable. We ALL share it. But while you may feel overwhelmed, Michael Masterson, author of Automatic Wealth for Grads ... and Anyone Else Just Starting Out (Wiley, 2006), reminds you that your age actually gives you an economic advantage over the rest of us.

"Most young people simply have no concept of how simple it is to build wealth," Masterson says. "I didn't say easy, because hard work and self-discipline are required, but simple. Any reasonably intelligent person with a fairly ordinary career trajectory can do it. But now is the time to get started – with every year that passes, your window of opportunity closes a little more."

Here are some practical, proven steps you can take to start building wealth while you're young from Automatic Wealth for Grads ... and Anyone Else Just Starting Out:

Pick a Great Career

Frequently changing jobs when you are first starting out will only set you back in your goal to achieve wealth. "Instead of focusing on businesses or products that you like to use, focus on activities that you like to do," Masterson says. Are you a talker? A thinker? Do you like to write? When comparing one sort of job to the next, look at specific positions and find out what kinds of activities comprise most of the time spent.

Start Saving the Minute you Graduate

Your college days are over. No more spending every last penny on dining out and drinking with friends at your favorite bar. Even if you just started working and feel overwhelmed by the college loans you have to pay back, you must start your saving program today. The reason you want to start saving now, even if your income is small, is that you want to create the habit of saving. "When saving becomes habitual, it becomes easier," Masterson says. "And anything that you can do easily, you'll do better, more often and over a longer term." The result, over time, will be significant compounding wealth.

Become an Invaluable Employee

To earn significantly higher raises than the average person, you must perform at a significantly higher level than your coworkers. "So long as your work performance is ordinary, you can't expect anything more than an ordinary salary," Masterson says. "But if you change your work habits and contribute substantially more than your fellow workers, you can rightly expect to be paid substantially more than they are getting."

Start to Invest This Year and Invest More Every Year Until You're Rich

You might think that sounds like it is easier said than done, but it actually is easy to do. By investing 15 percent of your income starting with your first paycheck, and getting slightly higher than average raises, you can get wealthy quickly – and very, very wealthy by the time your friends and colleagues start to think about planning for retirement.

Share an Apartment

Sharing an apartment won't be like sharing your cramped dorm room in college. You'll have a lot more of your own personal space, and you shouldn't have a problem avoiding the need for bunk beds. Assuming that you start out at around $30,000 a year, it is important that you spend no more than around $750 in rent per month. "Minimizing your living expenses will make a big difference in helping you to accumulate wealth," Masterson says.

Increase Your Rate of Saving as Your Income Increases

In other words, instead of sticking with saving 15 percent of your income throughout your career, you could bump your saving rate up as your income goes up. "Be careful, though," Masterson says. "You can't do this too aggressively. Nor can you do it forever."

Invest in Real Estate

Next to owning your own business, investing in real estate gives you the highest potential return on investment (ROI). "As a recent graduate (or young person), real estate offers you a tremendous opportunity," Masterson says. "That's because you don't need a lot of money to get started and you can use your youth (the many years you have to let your investments appreciate) to work in your favor." Consider the numbers. In a typical leveraged (mortgaged) real estate deal, you would invest $20,000 to buy a $100,000 property. If that property appreciates 4 percent (or $4,000), the ROI you achieve is not 4 percent but 20 percent because of the leverage ($4,000 is 20 percent of $20,000). However, "[w]ith our current economic situation, now is not the best time to invest in real estate," Masterson says. "The time will be right when prices start to come down."

Become a "Chicken Entrepreneur"

No, this doesn't mean you have to work on a farm, and (unfortunately) there is no funky dance involved. It simply means that you start your own business on the side while keeping your job with another company. "I favor this approach because it allows you to extend your wealth and business experience, while working under a safety net in case things don't work out," Masterson says.

Identify and Eliminate Your Major Time Killers

Unfortunately, the list of time killers may include some of your favorite things, such as watching TV, playing video games, Web browsing, etc. A time killer is any activity that consumes most or all of your mental energy and provides little – if anything – in the way of lasting benefits. The worst time killers not only give you nothing in exchange for the time you invest in them but also leave you weaker, less energetic and duller than you were before. "Eliminating your time killers will give you back hundreds of precious, productive hours every year," Masterson says. "That's time you can devote to achieving your goals, enjoying friends and family ... and making the world a little better than you found it."

Speaking of saving the world, if you're worried that so much focusing on money is incompatible with your idealism, don't be. You don't have to give up your altruistic goals. In fact, making yourself financially comfortable is the best way to ensure that you have the time and the means to achieve them.

"Right now, you may think becoming a millionaire is not a laudable goal, "Masterson says. "You might say money doesn't matter. Well, it may not matter now, but it certainly will when your kids are applying to colleges or when you're approaching retirement. Financial independence frees you to live a rich, fulfilling, authentic life. And that's the true definition of wealth."

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