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You’ve heard Dave talk plenty of times about building wealth with the seven Baby Steps, and he often gives tips to young adults on how to deal with debt and save money.
But for a 17-year-old like Braden, a recent caller to Dave’s show, does it work differently? He wants to know how to build wealth, but should he be worried about saving for his kid’s college fund when he’s barely old enough to attend college himself? What about buying a house? How does building wealth with Dave’s plan apply to young adults?
As Dave explains it, there are five keys to building wealth. Anyone who practices these five policies in their life will win because they are maximizing the good (saving, living on a plan) and eliminating the bad (debt, overspending). Here are Dave’s five keys:
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Get out of debt and stay out of debt.
When you don’t owe anything to anyone, you keep your money with you. You also don’t pay any interest. If you finance a $20,000 car at 5% over four years, you pay $22,108 for a $20,000 car. That would be like walking up to the dealer and saying you want to pay too much for the car, and you won’t take no for an answer. Makes no sense.
Be a saver of money.
Money gives you options. If you have $10,000 saved in a money market account for emergencies, then you’re prepared when some idiot driving alongside you changes lanes without signaling. If you save money, you can get a deal on that used car or big-ticket item you want by flashing the cash. Saving money year after year in investments will also give you a very comfortable retirement.
Live on less than you make.
How can you ever expect to be wealthy if you earn $4,000 a month but spend $5,000? When you spend more than you make, you dig yourself deeper into a hole. Not only do you have nothing, but you owe something. Live on less than you make, and you’ll always have enough.
Make a written budget each month.
A spending plan is like a treasure map. It shows you what to avoid and what path you should take, and it leads you to riches. Each month, before the month begins, write down what you are going to spend that month. Make your income and outgo equal zero. Do it every month, because your spending is always different. An April budget won’t do you much good in December. Making a plan and sticking to it will also prevent impulse spending, which will sink you in a flash.
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Be a giver.
This is probably the one you didn’t see coming. Doesn’t giving mean you have less money? Technically yes, but giving has valuable benefits. For starters, giving to others makes you more appreciative of what you have, which can actually help curb your spending. Second, people who give tend to find blessings and attract people into their lives who can cause them to be blessed more.
These tips for young adults are crucial to building a strong financial foundation. And the longer they apply these principles, the more they’ll see that it’s worth it—and then some.
What have you learned from these principles as you’ve applied them to your life?
Need help making a budget? Getting out of debt? Taking control of your money? See how EveryDollar can help you get on track!