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Only about one out of a hundred people will listen to free advice and that figure may be half that if you are a person under thirty listening to advice from anyone in their sixties.  So I hope at least two or three hundred of you young people read this advice and maybe I can change at least one or two lives when it comes to planning for retirement.  The advice I am going to give is very sound advice but you are not going to want to hear it.  Almost none of the two or three hundred of you young people that may read this free advice will follow it.  I know because I was your age once myself.

When I was in my mid thirties a seventy two year old man gave me a book called “The Richest Man in Babylon” and to this day I have not read it from cover to cover.  It was free information I did not ask for, so being young I did not listen.  The bottom line to the book was to save ten percent of all the money that passes through your fingers in the way of earnings.  At that time I created and owned a business generating about twenty thousand dollars a month.  That was in 1975 (probably equal to about fifty thousand a month in today’s money.)  Bottom line, I did not follow his free advice.  With the simple advice I am going to give you, if invested properly I would have had somewhere between five and ten million dollars more today in my retirement account.

Here are my two pieces of advice.  First…If you go to college, do not get a college loan from anyone.  Work your way through if you have to but don’t borrow any money.  Go to a cheaper college or take eight years to get a four year degree and work through it without borrowing a penny.  The Government guaranteed loans were the worst piece of legislation ever passed by congress.  For sure do not do the kind of loans or grant program congress is considering at the present time.  They are proposing a college loan program where anyone can get a college education, then go to the work for the government after graduation and the loans will be forgiven.  Watch out!  If it sounds almost too good to be true, watch out.  The existing program is bad enough.  Many people spend ten or fifteen years paying off student loans that were very easy to get.  Those loans last forever even if you declare bankruptcy they do not go away until paid off.  With many of those loans the lender can raise the interest rate to extremely high rates (some almost as high as 30%) and you can not do anything about it.  It would be like owing money to a loan shark or a drug dealer.

And for the new government proposal, watch out.  A free college education sounds great but you don’t know what kind of strings may be attached.  What if after graduation you go to work for the government and don’t like the people or kind of work you are doing?  What if the government job goes against your principals (moral or ethical)?  What if you get fired?  What if the government wants you to work many more years than they originally agreed?  Look at what has happened with the banks.  They aren’t allowed to pay the money back.  What if the government changes the rules in the middle of the game like they have done with all this government funding?  What if they figure they own you?  Believe me you don’t need any form of government funding.  Work your way through college or don’t go.

Second piece of advice.  Don’t buy a new car until you can pay cash for it.  I bought my first new car when I was thirty nine years old (it was a Mercedes.)  My business had generated over two million dollars in revenue by then and my business that I owned leased the car. At the end of the lease I was able to buy it from my own company. That was in 1979 and the tax system under a lease allowed me to receive an investment tax credit of four or five thousand dollars.  That is the only new car I ever bought that I sold for more than I paid for it.  Today I would never lease a car. It is a very bad deal Today I call a lease a fleece.  Buying new cars will keep you from becoming wealthy.

Here are some numbers for you young people.  The average new car payment is $378 for 84 months.  That same $378 a month invested from age 30 to age 70 in an IRA in a good growth mutual fund (with a thirty year track record) will make you 5.6 million dollars.  How do you like that new car now?  Sounds pretty stupid doesn’t it?  Here is the secret to financial success for a young person especially.  Never have a car payment.  Some people say “you are always going have a car payment.”  That is the motto of the middle class.  That is what poor people say.  I know it sounds really harsh but if you can’t pay cash for your car you are buying too much car.  Never pay payments on a car.  If you are paying payments on a car right now think how much better off you would be without that payment.  If you are a college student and have car payments on a car sell it right now and buy an old clunker that you can pay cash for.  Think of how much better off you would be without that payment.  Get real; there is plenty of time to have nice things.

If you just turned nineteen years old and you put $2,000 a year in a ROTH IRA through age twenty six for a total of $16,000 and stop investing. (All you have put in is $16,000) Invested in a good growth mutual fund (with a good thirty year track record) when you are 65 years old you will have accumulated $2,282,000 yes over two million dollars.

On the other hand if you wait until you are twenty seven and put $2,000 a year in a ROTH IRA until you are 65 years old (a total of $78,000) you will only have $1,537,000 yes only one and a half million dollars.  So now you see why it is easier to advise you younger people how to get retired than it is for my fellow seniors.  Now is the time to build your future retirement.  Don’t wait another month get started today.

For good money advice check out www.daveramsey.com I don’t make anything for telling you about this guy but I recommended him to both my own son and my sister. His heart is in the right place and I have never heard him give any bad advice to anyone.

For you well healed seniors that same $16,000 eight year ROTH formula applies for your grand children as well.  It is a pretty sensible $2,282,000 retirement formula.~Carl Wheeler

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