Yes, building wealth from scratch IS possible, especially if you live in America. There are just two steps to the process: Step one, start investing. Step two, don’t stop.
There are plenty of places “found money” could be hiding in your life. Your next tax return, your next cost-of-living raise, your daily latte. Once you find the funds, do yourself the biggest favor of your life and start putting your money to work for you. It doesn’t matter how much money you earn; it matters how much you keep. The more you keep (i.e., invest), the more your money can compound on your behalf.
Start somewhere. Most brokered accounts require a minimum opening balance, which could range from $25 to $2500 or more. The bank where you have your checking account could be an excellent place to start. Walk in and ask the teller if you can speak with an investment advisor. Most bank branches have someone available during banking hours. If not, they can schedule an appointment for you. If your employer offers a sponsored retirement account, start there. Employer-based accounts usually do not require a minimum from individual contributors.
This is step two: Make your investing automatic so you won’t stop. Investing should be a regular habit, just like brushing your teeth. In his book The Power of Habit: Why We Do What We Do in Life and Business, Charles Duhigg teaches readers that habits run on a loop. They require a cue and a reward. With investing, the reward is not immediate, so habit formation is crucial. Automatic withdrawal from one’s paycheck can be a helpful method for budding investors. If you want to retain more control of your investment directives, find another cue to help you set the habit. For example, pick a certain day each month and mark it on your calendar as “investment day.”
Even better: If your employer offers a retirement matching program, use it. Investment contributions can be automatically taken from your paycheck, plus your employer will handle any advisor fees. Your employer may even offer a matching contribution of up to 100% of the amount you invest. See the Porch Archive for more on this.
Our consumerist culture will give you a million reasons to stop investing (or not to start). Every minute of every day, we’re presented with things and experiences that we might miss out on. Don’t fall for it. Delaying gratification now will pay off in the long run. Try to gravitate toward like-minded people who are interested in building wealth. The investors don’t usually raise their hands and demand your attention like the advertisers do, so start observing the people in your life. Do any of your friends or family members complain about money right after they step out of their brand new, leased car? Those are NOT the investors. Find someone who doesn’t seem stressed about money and spend more time with that person. Even if you don’t feel comfortable discussing the financial markets, at least the investment-minded people in your life won’t encourage you to spend. They have goals. They have self-discipline. They have a closet filled with the same clothes they wore last year.
Another great motivator is the Business & Finance section at your local library. (By the way, it makes much more sense to borrow investment books than it does to buy them.) Start reading. Here’s a quick reading list to get you started:
You could also subscribe to podcasts on the topic. There are plenty of people discussing finance for beginners. But first: unfollow the superficial influencers. Their job is to encourage you to spend money and to waste your attention. Ditch the noisy advertisers and fill your podcast app and your other social media feeds with investment experts like Dave Ramsey or The Motley Fool team.
Finally, if you’re struggling with whether or not to spend money in the moment, think of it this way: Every time you buy something you don’t need, someone else gets one step closer to their investment goal. And all you’ll have is the thing you never needed. Choose to keep your money. Choose your retirement over theirs.
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