TEMPLE, Texas — Two things make money in the market. Time makes money, and money makes money. Young people have time on their side but tend not to have a lot of money.
So, let's say you're 29 and want to retire at 67. Even if your current retirement balance is $0, if you save $250 a month between now and then, you'll wind up with about $1.1 million, assuming a 10% average annual return on your investments.
That would be even better if you started in your early 20's. Many recent college graduates are in their first fall in the work force, and many are drawing a steady paycheck for the first time in their lives.
So, what is the plan? On this edition of Money Talks, 6 News asked financial advisor Rolandus Johnson what he would have told his younger self after just graduating college.
"I would have told myself, 'Hey go sit down with somebody that has been doing it for a while and say hey, what are some things that you have done?'" Johnson said. "But I definitely wouldn't shoot from the hip and just immediately start spending it because what happens is you are getting consistent money now and you want to buy everything that you have wanted to buy the past few years, and so you just start buying stuff. And that's a true story, that's what I did!"
Johnson also suggested a top thing that those graduates should immediately start doing.
"You know, you go five to ten years shooting from the hip and then you're in catch-up mode. But I will say this, there is always time for paying yourself first. No matter what is going on, if that is not in your top 3 priorities then I think that you are doing something wrong, that's my opinion," said Johnson.
Johnson likes to point out that people think investing is something that they will do in the future, but consistently starting in your early 20's really sets you up for life!
“Top priorities, one of those should always be pay yourself first, whether that's buy stocks early or putting it in a set it and forget mutual fund type program," said Johnson. "The beautiful thing that you have graduating college is time! That's the thing you've got and time in the investing world, you will win 100% of the time, and with just investing and having time just to do it."
Ff you don't know anything, swallow your pride and learn, ask some questions. After all, if you want to live in a mansion someday, don't ask a guy living in a cardboard box how to do it!
"You know, you talk to several guys and there's a bunch of great advisors in Central Texas and just in this area alone and they'll tell you a little, you know you are 22, 21-22, 23 years old coming right out of college and small amounts, even like 100 to 150 dollars of every paycheck, will pay huge dividends by the time that you are 40 or 50 years old. I mean you're looking at, depending on market and economic environment, man, you could be looking at 250 thousand to half-a-million-dollar head start. You know getting into your mid to late forties and retirement 29 years away still," Johnson said.
So, does Johnson worry about his kids not being savvy, once they enter the workforce?
"Well, they better not be because hopefully I’ll still be around and kicking and they can always come see dad!" laughed Johnson.
The average 20-something has a retirement savings balance of $35,800, that's according to Northwestern Mutual's latest planning & progress study. And if your balance is comparable, it means you're in really solid shape. So good job!
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