It’s not as hard as you might think.
Disclaimer: I’m not a personal finance expert. While I did study business and economics in college, I’m not a CPA, CFP, MBA, or any other of those confusing acronyms. I haven’t taken my Series 7, 63, 66 or any of that. I probably shouldn’t be advising your parents on how to invest their nest egg, but I hope this article can give you some solid advice on how to set yourself up for success down the road. Deal? Read on.
Millennials and Money
The overwhelming majority of Millennials don’t have a clue about money. Our expectations are out the window, completely divorced from reality.
While some twenty-somethings are quite wise with their money, the vast majority of us make terrible financial decisions when we’re young without knowing the consequences – only to wake up when we’re forty and go, “How on earth did I get here?”
Personal Capital did a study recently on Millennials’ attitudes toward money, and the disparity between expectations and reality was staggering:
Millennials expect to spend just $142,274 on a home purchase. Considering that the median home price nationwide is around $220,000, I think we’re in for a shock.
Millennials expect to spend $325,357 on vacations by retirement, and expect to work 15 years on average and then retire. If those assumptions are correct, that’s $21,690 per working year on vacations.
If those figures don’t shock you, maybe this one will:
The average Millennial expects to inherit $1.06 million from their parents.
Clearly, our expectations aren’t aligning with reality. But if we’re all so desperate to become millionaires, how do we do it?
Turns out, it’s simple.
How to Become a Millionaire
Call me a teacher’s pet, but my favorite professor in college was…my father. That’s right, I’m that guy.
My sophomore year, he took a three-year commitment to teach at my college and pinch hit for the Business and Economics department while they were searching for a permanent endowed chair. He taught upper-division business electives, from Entrepreneurship and New Venture Development to Executive Leadership.
One of my favorite lectures was when he asked the class, “So, who wants to be a millionaire in their lifetime?”
As expected, nearly every hand shot up. There were some students reluctant to raise their hands (it was a Christian college, after all), but we all knew they really wanted to raise their hands.
“Alright,” he said, “who knows how to do it? How do you become a millionaire?”
Several classmates had good thoughts, from investing in the stock market and flipping houses to some really creative ideas like becoming a patent troll to investing in Bitcoin and the like.
But all of those were wrong.
Finally, he went to write on the board, saying,“The way you become a millionaire is by buying something for $1, selling it for $2, and repeating that a million times.”
There it was on the whiteboard, clear as day:
$2 – $1 = $1 x 1,000,000 = $1,000,000
He had stumped everyone, and he let us sit in silence as the profoundly simple lesson sank in.
It’s really not that hard to be a millionaire.
Business (and money) is simple
He then went on to talk about how simple business could be – it was all about doing good work, treating people well, always doing the right thing, and letting your work speak for itself. A phrase he liked to use was “the habitual pursuit of excellence.
He showed me that day that business – and money in general – isn’t complicated. It doesn’t have to be mystifying, and it doesn’t have to stress you out. Just habitually pursue excellence in everything you do (including your personal finances) and you’ll be much better off.
However, the habitual pursuit of excellence will require discipline.
It’s not going to come easy at first, and you will not get rich overnight (if that’s why you’re reading this article, go throw your iPhone out the window). Building good personal finance skills requires discipline, patience, and the humility to admit your shortcomings and failures, laugh them off, learn from them, and keep moving.
Millennials like us get us a bad rap with older generations because many of us continue in a perpetual cycle of terrible money management that will set us up for failure when we’re their age…
But that doesn’t have to be the case.
The way we can break the cycle is by figuring out what we know about money, what we don’t, expose the lies that we believe all too often, learn from the terrible choices we’re making now, and keep on going.
As Mark Twain once said, “The secret of getting ahead…is getting started.”
This post originally appeared on www.crawfordifland.com