Two Simple Money Rules

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:

  1. Live beneath your means
  2. 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.]