College Grads, Here’s How to Become Millionaires

The real reason to save money isn't to invest it in the stock market, it's so that you have the option to pounce when an opportunity arises. Say that a few of your smartest friends are founding a new startup, and they ask you to join, but they won't be able to pay you anything but equity until it gets off the ground. If you've got cashed saved up, you can take this risk; if you don't, you'll have to pass.<p>Stocks <i>can</i> fall into this category, but you should make that determination based on the fundamentals of the stock, not based on the blanket declaration that stock prices have always gone up in the past. If you see a stock that's grossly undervalued by the market, it's wonderful to have cash to pounce on that. If the whole market is (still) overvalued, which it seems to be to me, it doesn't make sense to pour money into it.

This is extrapolating from a pretty small data set, and worse, the data set was collected in circumstances different from the ones it's being used to make predictions in. It's quite possible stocks will go up in the 2010s, but the fact that stocks went up in the 1940s after losing a bunch in the 1930s isn't a very good reason to think so--- the pattern is extremely weak, and collected from a data set that isn't nearly big enough to falsify these kinds of pattern inferences.<p>But nonetheless, you can still do better analysis than these kinds of eyeball-the-chart analyses. Does this prediction of cyclic returns hold up under some attempt to retroactively test it, e.g. via cross-validation?<p>And of course that's ignoring the bigger problem, that it's quite possible average returns in the 21st century will not be as good as average returns in the 20th century were, making any extrapolation too optimistic.

Save money and invest for your entire life so you can be rich when you are older. I don't know. A lot of people doing this end up spending their whole lives making more and more money, only to realize in the end that they have all the money they need, but very little time to spend it.<p>Why not spend your days earning as much money as you can, and using that money to do the things you like. So, when you are older, instead of having 1 million dollars in a bank, you have 1 million dollars worth of experience.

My experience in life thus far has suggested to me that it's not about saving, but about growth and pushing forward. You can scrimp and save, but if you instead put your resources to task and try to grow, you can move up to the next level, where your savings from the previous level are a pittance.<p>It is of course inherently more risky, and requires effort, but it seems like a better choice.<p>A case example is my uncle; a member of his family racked up some huge medical bills due to a hospital's mistake decades ago. He is starting a somewhat risky business venture, and I asked him why he wasn't instead getting a job and working. He told me that the bills were so great that working a regular job would never be able to pay them off, and so this was his only option.

&#62; I’m a student of the market, the author of Investing 101 and can say with some authority that the market’s miserable decade-long performance is exactly what spells huge opportunity for you.<p><i>cringe</i>

This article is pretty right on some points. Most millionaires are just good earners (but not rich) who live under their financial capacity, and saved over a long time. Because of the compound effect, it is also much more important to save while young. But of course everything is a trade off: a good dinner for networking or a set of new clothes (think you may have to buy a suit to meet your first customer) can produce a positive return.

This is a particularly good counterpoint to some of the ideas in the article:<p><a href="http://www.economist.com/node/16479024?story_id=16479024" rel="nofollow">http://www.economist.com/node/16479024?story_id=16479024</a><p>* Even though stocks have fallen in the last decade, they are still historically expensive. Because the fell from such a high peak in 2000.<p>* The more people that follow the author's advice of investing in shares (the cult of equity), the worse their collective return will be.<p>* Unrelated but interesting is that high-yield bonds have outperformed stocks since 1995.<p>If you'd invested $1,000 a month since 1970 you'd be rich. Yes, but $1,000 a month in 1970 was a lot of money. In 1970 the median household income was around $800 a month (in 1970 dollars).<p>It'd be more informative to know how rich you'd now be if you'd invested in stocks something like 20% of the median household income for the past 40 years.

This sounds like a standard spiel that financial advisors at your local bank are trained to give. Even aside from all the problems with this sort of 'analysis' like using past to predict future, extrapolating from a small data set, etc, the fact that their computation of past returns has no reference to inflation should tell you that you'd be better off listening to someone else.

Also don't forget that the total inflation between 1970 and 2000 was 340%, that is 4.03 millions of 2040 dollars would only be worth 0.9 million in todays dollars if history repeats itself.

If you make 10 dollars an hour and have an hour lunch, cutting 15 minutes off your lunch nets you $50/month. Taking only a 30 minute lunch nets you $100/month.<p>If that same 10-dollar an hour job isn't picky about overtime, showing up 15 minutes early and leaving 15 minutes late gets you another $100/month.<p>Show up 15 minutes early, take a half hour lunch, $200/month. On $10/hour, that's not something to scoff at.<p>Easier to get rich by focusing on increasing your income, rather than saving what you have, if you are on that low-level wage.

Saving is good, but the "miracle of compound interest" is hard to believe in after a <i>decade</i> where you literally would have been better off stuffing your money under a mattress. Past returns are no guarantee of future gains, so the argument that "we're at a low point and can only go up" doesn't really hold. I mean, I hope the market will go up, I've been investing in a disciplined asset allocation rebalance once a year style for the past 8 years, but, I'm just sayin'<p>So if you don't invest the money in the stock market, where else? Yourself. Live off savings and do a startup. Pay for education. Other ideas?

Yet another "spend less, invest in the market" article.

The best advice I've ever heard on getting rich.<p>Get a job and bank 10-20% every week. Live on the rest. Get there faster? Get a second job and bank all of that.

I've been telling this to anybody who'd listen ever since I started doing it myself:<p>Continue living like a college student for 5 years after you leave college and you'll never need to worry about saving for retirement.<p>It really is that easy. You're going from a state where you have $500/month in expenses and zero income to a state where you have $5,000/month in income. It's trivial to save $10k/year at that point unless you go out of your way not to.<p>Even at 10% returns (which you can pretty much always get), your money will double every five years. Don't touch it 30 years, and that's a lot of doubling. And speaking of 30, that's when you can stop.<p>I essentially retired when I was 30 years old, and now just work the occasional short contract to pay the rent. Meanwhile the stack keeps growing in the background, waiting for grey-haired Jason to retire on it 20 years from now.

hmm, so I guess by this argument, if I flip a coin 3 times and it comes up heads, the next time is more likely to be tails...

Don't know about the stock thing, but finding a cheap city to live in (Pittsburgh being one) and living like you're a poor college student is definitely one way to save a crapload of money. What some people earn and spend in a year will probably last me 3-4 years if not more.

What I've been working on is a way to make the value of my tuition while in school. I think I can figure out a marketing service I can sell for $100/week but I can't figure out how to scale it. The challenge of making 50,000/year on my own is fun to ponder but I'm not making much progress.

I can understand this if I invest in something like an index fund, which is updated regularly to reflect a particular stock market. But it doesn't help if I invest in companies X, Y and Z. They might go bankrupt, in which I will lose my money completely.

"because of the really rotten returns in the 1930s, investors could expect a “catch-up” decade and they got it."<p>I'm not sure it works like that...

The S&#38;P, adjusted for inflation, has returned -30% for the last ten years<p>But go ahead and feed the machines at goldman sachs some money.

Translation: I need to exist stocks into cash before you idiots realize we're in for a severe bout of deflation.

12000 X %473(inflation) = $5,676,000<p>This is why I don't trust banks. Realistically you would of been smarter to buy capital that could immediately help your situation.<p>It seems to me bettering yourself as a person with that money results in greater gain.<p><a href="http://inflationdata.com/Inflation/Inflation_Calculators/Inflation_Rate_Calculator.asp#calcresults" rel="nofollow">http://inflationdata.com/Inflation/Inflation_Calculators/Inf...</a>