For the young folks out there, the single most important thing you can learn at your age has nothing to do with investing.
It’s simply this:
- Live beneath your means
- Do not borrow money
If you just go to work every day, try your best, build a career, save money (20%-25% of your income) and don’t get into debt. By the time you are 35 years old, you will be well ahead of the game.
By the time you’re 40, you can be a millionaire, easily. And you don’t have to do anything with investing beyond corporate bonds, municipal bonds, or local real estate deals. There is no reason for you to become a stock trader or an options seller at this time.
Now, let’s say you’re 55 years old, you’re retiring. You’ve got 40 hours a week to spend on your investments. Fantastic! You can do the options stuff. You can start getting into the junk bonds. You can learn to trade the junior mining stocks, which is hard to do but can be very lucrative.
But if you’re 20-something right now, don’t waste your time and energy with all that stuff…
You can read about it, you can learn about it. That’s great. But just focus on increasing your income by building a career and/or having a part-time business of your own and living beneath your means.
Now here are some easy things to avoid:
- Don’t ever borrow money to go to college. College is a waste of time to start with. Why would you borrow money to waste time? It makes no sense.
- A young couple gets married and they have a kid, they’ve got to have a house, the house, and they go crazy into debt to buy it. This is the trap that a lot of people fall into.
Don’t do it. If you just focus, instead, on living within your means, you can buy a small condo. You can live there for five years until you can afford to buy a small house. And by the way, I said buy. I didn’t say mortgage.
If you become dedicated to never getting into debt, your entire financial life will be brilliantly successful. If you can’t avoid the temptation to get into debt, there’s a 50/50 chance that you’ll never make it. So what’s the best thing you can do to increase your odds at financial success?
Simple. Live within or below your means and avoid debt. But guess how many people will follow that advice?
Young people, I want to tell you this: unless you can do it on a full-time basis, you don’t need to start investing yet…
Sure, some of your money should go into high-quality, blue-chip, dividend-growing stocks. Absolutely. That’s part of your savings program. You can do it via your 401(k). You can do it with an IRA.
I’m not saying avoid stocks all together. But I’m saying most of your money should be in corporate bonds, municipal bonds, gold, silver, and rental real estate.
More importantly, figure out how to avoid being in debt. There is an easy way to do it. Just say, “I’m not going to borrow money.” Then everything else in your life will become a lot simpler.
You’re not going to be shopping for a new car, for example. You could buy a decent car for $2,000. Why would you borrow $20,000 to buy a new one? It makes no sense.
If you really want to be rich, remember: Don’t ever borrow a penny. As soon as you understand interest, you will only be a lender. You will never be a borrower. Out of all the things I did right financially, that was the most important one.
I was also dedicated to only working for myself. And if you can put those two things together, you can be rich by the time you’re 30.
But I’ll tell you this. There is more to life than being rich. If you know my story, then you know I gave up on lots of other things in my life for many, many years. But this is what I wanted. I wanted to be rich, and I sacrificed everything else to get it. There are people out there, who are 20 years old, who say, “Yeah, that’s what I want to do too.”
But guess how many credit cards they have in their wallet. Don’t tell me you want to be rich and then tell me that you borrow money all the time. Because you’re just fooling yourself.
[Ed. Note: To hear this and all of Porter's interviews, arguments, and insights, you can click here to subscribe to the free podcast. You can also download all Stansberry Radio episodes from iTunes here. You probably won't agree with everything Porter says, but every episode provides investment ideas and a view of the world you won't hear anywhere else.]
Two Simple Money Rules,TODAY’S FREE OFFER
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“■Don’t ever borrow money to go to college. College is a waste of time to start with. Why would you borrow money to waste time? It makes no sense.”
A lot of people will get riled up over that statement, but there is some truth. I’ve know people with hundreds of thousands of dollars of student loan debt because they chose Harvard or went to law school, only to find they were then trapped into a career that they didn’t want anyway.
You should be clear on your career objectives and pick the most affordable means of achieving. For many college is a waste of time and money. For others not. Be clear on what you want in life and help your children or grandchildren to pick the most cost effective way to achieve their dreams.
Dan @ ZenPresence
This article sucks (sorry).
Do not ever borrow? Correct,.. for the frivolous items like a fancy car if you can only afford a $2000 car for cash.
But your advice is – never borrow ever. If Donald Trump had taken your advice, he will probably be working for someone, rather than running how own empire.
And college is waste of time? Are you real?
Are you serious that people who do not go to college are usually better off than those who do?
The point should be: go to college and aspire to start a business not to find a job.
You completely missed the point. So really disappointed.
- Peter
The advice to live beneath your means makes sense. No debt is sheer stupidity in an environment of very very cheap money. Leverage is a major method in both getting the most for your money and in making money. A 30-year fixed mortgage today at 4.00% or less is GREAT! Grab it and hang on. That doesn’t mean you need to buy the most you can get with your credit nor do I endorse credit cards — pay cash or pay it off each month — or other debt. Forget the condo. Buy a modest, 3-bedroom ‘starter home’ and put down AT LEAST 10%.
DO NOT l,ook to get ‘debt-free’ any time soon.
Invest your excess earnings in being independant — preferably (if you have the temperament) in being self-employed. If it will pay you in your chosen profession, get as much education and (not necessarily learned) certification as possible.
Wow, this is THE WORST article I’ve ever read on ETR. With mortgage interest rate at its historically lowest ever, and mortgage interest still tax-deductable, advising not to borrow money to buy a home is sheer stupid. For someone who heads several investment newsletters to advise young folks not to invest in stocks is simply insane. I’m disappointed that ETR ran this kind of garbage!
The points that the author is trying to make, at least to me are the follows:
- Borrowing money only creates more debt for the consumer and does not make it easier for the borrower to achieve financial freedom in the long run.
- That it is possible to live within ones means without having to compete for the accumulation of products in this consumer based economy. You can find alternative products that can provide sufficient satisfaction without breaking the bank.
- A college education is not for everyone. Not everyone has the discipline or the mental capacity to complete and obtain a college degree. Even if you did, the degree does not gaurantee success or a sense of accomplishment if you risk enrolling into higher education and place yourself in a high debt loan situation.
- And lastly, saving and investing your hard earned money can ensure that you have some nest egg for when you begin your final years in retirement.
I thought that the article was not that bad as others remarked. The author sounded alittle like Benjamin Franklin at the beginning of our nation. except that Franklin was talking about saving your pennys and this author was talking about saving your dollars.
Thanks Frank, appreciate the feedback and your points are well made and well taken.
Fundamentally good advice, though possibly taken to extremes.
I was raised with the “do not borrow” ethos but with one exception – a mortgage, as most people do not have the means to purchase a home without one.
Having lived in rental properties for short periods while relocating, I quickly became aware that if you can afford rent then you can afford mortgage repayments, as renting is simply paying off somebody elses’ mortgage, most likely with a bit added on the top. The difference between the two is finding the lump sum (at least 10%, preferably 20%) to use as the deposit for the purchase.
The “college is a waste of money” statement sounds a little harsh too, though is possibly a reference to various entrepreneurs who accrued fortunes without the benefit of tertiary education. Perhaps work, save some college money and then attend as a mature student. There is more to tertiary education than the academics.
I was fortunate in that I graduated from university (UK) without debt. I was flat broke, but I didn’t owe anybody anything and looking back that was extremely important as I did at least start off at the zero line, rather than somewhere below. I realise that for many contemporary students, that is no longer possible but for them the advice to live frugally/minimally along with reading a subject that is considered ‘useful’ is a must.