Why You Probably Haven't Invested Yet
I posted an instagram photo to Facebook last week showing the books I’m currently reading. Most of them are tech related, but the one that seemed to draw the most attention was “I Will Teach You To Be Rich” a New York Times Best Seller by Ramit Sethi.
I stole the book from one of my roommates in Boston (thanks Liam!) after following Ramit’s IWTYTBR blog for some time.
Ramit’s advice is specifically tailored to college students and young adults. The book is literally a guide full of simple, no-nonsense ways to automate your finances (“set it and forget it!”), save a little extra and, well… get rich.
The book also offers a lot of tips on hustling in general. I used his scripts in the second chapter to negotiate a 50% increase in my credit card limit right before spring break, even after the representative on the phone said that she couldn’t authorize that much initially. Swag.
You should definitely check out his blog, and consider buying his book if you have any interest in managing your money efficiently (hint: that means everyone!)
It’s also important to note that this isn’t just for people who dream of being millionaires. Whether you’re trying to get rich, or just want to live a simple life doing what you enjoy and living comfortably, you’re going to be interacting with money whether you like it or not. You’re going to be making it and spending it and saving it and hopefully investing it. So regardless of your goals, it (literally) pays to know what you’re doing.
I was reading it this afternoon when I stumbled across a section that was particularly poignant: “Why Your Friends Probably Haven’t Invested a Cent Yet”.
I hope Ramit won’t mind if I quote extensively from his book here, but it really struck a cord with me and it’s something I want all of my friends to read:
Before we go any further, let's take a minute to understand why young people are not investing. Then you can secretly scorn them once you've opened your own investment accounts.
Ask any of your friends how much they've invested and they'll say things like, "Huh?" or "I don't earn enough to invest." Most of them will say, "I don't know how to pick stocks," which is ironic because INVESTING ISN'T ABOUT PICKING STOCKS. Although it's true that some of them might participate in a 401(k) -- a type of retirement account -- that's probably the extenet of their investments. And yet these are the most important investing years of our lives!
As a grand illustration of the importance of saving and investing early, consider the famous hypothetical story of Sally and Dan. The story is fake but the numbers are real.
Sally starts saving at age 25 and puts aside $100 a month for 10 years, and then stops at age 35 and just lets the money sit in her investment account until she retires.
On the other hand, Dan starts investing at age 35 and also saves $100 a month, but he does so for 30 years.
Assuming that they each earn a standard 8% return on their money until they are 65, Sally could have $200,061 in savings by the time she reaches 65. But Dan, even though he saved longer, only earned $149,036.
Dan set aside far more money over his lifetime, but ended up with less, because he waited to start saving. There’s no special skills or voodoo magic or luck involved here.
By thinking about this stuff now instead of waiting, you will literally end up with tens of thousands of dollars in free money that people miss out on by not thinking about this stuff early enough.
Back to Ramit:
Financial institutions have noticed an interesting phenomenon: When young people enter their forties, they suddenly realize that they should have been saving money all long. As a result, the number one financial concern Americans have is not having enough money for retirement.
... To bring this close to home, ask your parents what they worry about most. I'll bet you their answer is, simply, "money." Yet we're not paying much more attention to our finances than our parents did. ...Of American millionaires, 80 percent are first-generation affluent, meaning their parents weren't rich. They collected their significant wealth through controlling their spending, regular investing, and in some cases, entrepreneurship. Not as sexy as winning the lottery, but much more realistic.
I’ll stop quoting there cause I think you get the point.
You need to be smart about your money, and know a thing or two about investing and saving. But you need to learn those things now, not later, if you really want to manage your money efficiently.
Talk to your parents about it and read this book. There’s a lot of snake oil out there on the topic of personal finance, but believe me when I say that this book will be the best money you ever spend.
Consider it your first investment.
