Posted on 04/16/2008 2:46:49 PM PDT by kiriath_jearim
The under-30 crowd may be saddled with college loans, scratching for jobs and living on plastic, but they have one thing their elders can only envy: time.
Time to get their finances in order and let the magic of compound interest turn a quail-size nest egg into a honking stash that will see them through their later years. Now, if Lesley Scorgie can just get their attention and change some habits -- like overspending and undersaving.
"Our generation is the have-to-have generation, and we are not willing to wait -- to save for things -- anymore," said Scorgie, a frugal-minded financial guru from Canada. "A common theme among under-30s is they look at their parents and see what they have -- and they want it now."
At 24, Scorgie (pronounced SKOR-gee) already is a veteran investor who has mastered the art of delayed gratification. She ran a lemonade stand at 8, bought stocks at 18, put herself through college (she studied marketing and finance) and saved enough to buy a townhouse at 21.
She has worked in banking and securities, and her financial precocity landed her a spot on "The Oprah Winfrey Show" when she was 17. For the 2001 segment, "Ordinary People, Extraordinary Wealth," she says she had to produce financial statements proving she could be worth a million dollars by age 25.
While it's tempting to begrudge someone with such smarty-pants credentials, Scorgie radiates such gentle, low-key sincerity and good intentions, resentment is futile. You sense she really wants her fellow millennials to make good. Scorgie shares her money know-how in "Rich by Thirty: A Young Adult's Guide to Financial Success" (Key Porter, $12.95). Though the title suggests a get-rich-quick formula, the book is a straightforward primer on financial basics that can be paralyzingly mysterious and confusing to 20-somethings.
There's enough hunger for these fundamentals (Uh, what's a mutual fund again?) that the book has gone through several printings since its Canadian debut a year ago. It has been translated into French and Korean, and a U.S. version just hit the market.
There are countless personal-finance books out there, and lots of free advice on the Web. The advantage of Scorgie's book is that she's part of the youthful demographic her advice targets, and she boils financial complexities into a breezy, easy-to-read overview that won't scare off financial newbies.
The flaxen-haired whiz kid, who has a serious mien and seems older than her years, said she was forced to learn penny-pinching as a child when both her parents returned to school. "We lived -- a family of five -- off of $24,000 a year, and that's not too far above the poverty line," she said. "Never once did I have a new bicycle -- it would have been a used bicycle. As a family, it became, not a struggle, but a way of life. We learned the value of a dollar by not having any."
For her generation as a whole, she said, it's a different story. "We actually have negative savings rates. We're sporting an average $8,000 in credit-card debt, and student debt usually between $30,000 to $40,000 per household. We've also been the ones that have taken on some of these high-risk mortgages and gotten in trouble."
Scorgie believes schools should be required to teach basic financial skills, and her experience shows that once younger adults are clued into concepts such as compound interest, they get religion in a hurry.
The real value of money is that it gives people choices, including the choice to make less money. That's what Scorgie did when she left a $100,000 a year job in the securities field to work, for about half the pay, as marketing director at the YWCA where she used to volunteer.
"I would not have been able to make the decision to work at a not-for-profit had I not been saving and investing my money from a young age."
She sees the current economic downturn as a time of opportunity for under-30s, who can buy homes, stocks and other investments at depressed prices and watch them grow over decades.
Putting money aside may seem impossible for young adults struggling with college loans, high rent and car payments. But Scorgie said saving a little -- even $25 a month -- is better than saving nothing, because it adds up over time.
And it's never too early to start. High school students with part-time jobs often have more disposable income than their parents, but they tend to blow a lot of it at the mall.
If, instead, they invested $35 a month from age 16 and upped their contribution as their incomes rose, they could stop saving at 45 and still accrue a million dollars by age 65 as the interest (8.5 percent in Scorgie's example) builds on itself.
Now for the reality check. As a 17-year-old on Oprah, Scorgie confidently predicted she'd be worth a million dollars by age 25. A year shy of the deadline, how's it going?
"I won't make it and I'm OK with that. I'll have well over a million by the time I'm 30. I can't say anything went wrong. I just shifted my dreams a little bit."
Helpful links
savingforcollege.com: Basic tips, strategies and savings calculator
consumercredit.com: Home of American Consumer Credit Counseling, a nonprofit offering free debt counseling, low-cost debt management and other financial information
finance.yahoo.com: Its personal finance section includes Planning for Those Just Starting Out
moneycentral.msn.com/home.asp: Articles and tips on personal finance
bankrate.com: Articles, tips, calculators and rate comparisons 10 TIPS FOR UNDER-30S
1. Start investing now. If you wait, you'll lose the free money you'd make by letting your nest egg compound over many years.
2. Take control. Learn to budget, plan, spend wisely and handle debt. Hint: If your credit card spells trouble, put it in the freezer in a bag of water. You can rethink your next impulse purchase as you wait for it to thaw. (Don't try hammering the ice -- it'll wreck the card.)
3. If you don't need it, don't buy it. If you're not sure if you really need those stereo speakers or cute sandals, wait 24 hours and see if you change your mind. Hint: Eating out is one of the biggest budget busters.
4. Remember it's not what you have, it's what you do with it that counts. Many rich people started with nothing. If you can save even $10 a month, go for it.
5. Try mutual funds. These professionally managed funds pool money from many investors, so you buy a little bit of many stocks and bonds. They're relatively safe and easy and don't require large contributions.
6. Contribute regularly. Instead of trying to "time" the market, take advantage of the average price over the long haul by making regular contributions. This is called "dollar-cost averaging."
7. Diversify. Spread your money into different investment vehicles to reduce the risk of losing it all.
8. Be patient. Pick a strategy that suits your degree of risk tolerance, then leave your money alone for the long haul, knowing that markets fluctuate. Investors who buy and sell in a panic tend to earn less than 4 percent long term instead of the 10 to 12 percent historic average for stock and mutual-fund markets.
9. Pay yourself first. Even if you're paying off debt, reserve some money for saving and investing. Saving for your future should take top priority in your budget.
10. Strike a balance. Follow the three principles of wealth: spend wisely, save and invest and give back to the community.
-- From Lesley Scorgie's "Rich by Thirty"
ping
None of this is anything new nor are all under-30’s in the gotta have it now crowd.
Parsimony, and not industry, is the immediate cause of the increase of capital.
Adam Smith
The Wealth of Nations, Book II, Chapter III
My husband and I were turned onto Dave Ramsey a couple years ago, in our late 20s.
The rules of frugality also work in another way as well. When I was 18 years old, I wanted a Corvette but did not buy one instead electing to put my money in the bank. Now that I’m sixty and have the money to buy a Corvette, I don’t want one and can spend my savings for teeth and a hearing aid.
How about good old fashioned self-discipline? The only thing that provides lasting, instant gratification comes with saying no to yourself just because you know you should, or putting yourself out for someone else. It’s the elusive quality known as self-esteem that comes not from others telling you you’re wonderful, but from doing things that decent people do, like exercisng constraint, fidelity, self-sacrifice and generosity.
Exceptionally bright and driven individuals
Placed in an intellectually brutal, and later, physically and emotionally tasking environment.
Been there, done that.
Yet I have seen some of the self important weinies
and "hot house plants" coming out of
less tasking programs, and their sense of entitlement.
I think the key to wealth is to declare yourself a guru, and charge people money to find out how to become wealthy.
A total of about $30k in principal with annual returns of 12% to a peak of 47% in 1998 - and I don't pay taxes on it until it is realized as income when I tap it.
That $30k in principal I invested over 20 years ago broke the seven digit mark two years ago and it keeps growing. My 401(k), Roth IRA, my other investments combined total over $200k of capital yet have yielded just $195k over the same period.
That said, just saving the money is stupid. Investing it courageously is what young people need to do while they can recover from a risk if needs be.
It is easy to make money if all you’re interested in doing is make money.
Where are you going to get 8.5% interest these days?
Who knows I may buy a Corvette yet. Who needs teeth and what's there worth hearing anymore?
It's not an educational problem. Why save if you know you'll be bailed out? Why buy insurance if you know your government will bail you out? Why be honest on your mortgage application and buy a modest home if you know you can lie and the government will bail you out?
Let's be honest. It is NOT an question of education. It is a question of character.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.