How you handle your money, especially in your young adulthood, can predict where you will be, financially, in the future. Some factors can change this, like a really good promotion or starting a business. But, let’s just say for the sake of this conversation, you really like your job and want to stay exactly where you are. You can estimate, based on your salary or wage, how much money you would have in a total of one year, five years, even twenty years from now. (Before we go any further note that this is purely my opinion.) Let’s use an example.
Say you make $40,000 a year. It’s reasonable to expect that in ten years, one decade, you would have earned $400,000. If that seems like a lot to you then congratulations, but it’s not all there. This is why I wrote about this topic. LIVE BELOW YOUR MEANS. Don’t buy the expensive brand of milk at the grocery store or get a loan for the new car you don’t really need because the one you have still works. Put your money to make more money! That’s the key to creating wealth and freedom! If you were to stop going to work tomorrow, would you make any money? If so, keep investing. If not, start investing.
If you keep your living expenses low, say $15,000 a year, and you make $40,000, then you have $25,000 to invest every year. If you invested that into good, reliable, dividend stocks paying a 5% dividend, you would have invested a total of $250,000 in ten years. Just using that amount, in other words not taking compounding in mind, you would be making an extra $12,500 a year. Now it’s $52,500 you make a year! It doesn’t seem like much but it should be more because of stock growth and compounding. This is just an example, because you could have gone with real estate that would pay even more, but that’s for another post.
If you feel like you need a vacation then fine. Take at most 5% of what you make a year and go enjoy life. But if you’re serious about wealth, take less than that. It takes time to create wealth, but the feeling of doing whatever you want, whenever you want is unbeatable. You just need to start making the right decisions. Leave a comment below with your method of investing!