Here it is, Buck’s manifesto to becoming wealthy*. Follow these do’s and don’ts and you will be bucking-the-trend better than the majority of Americans when it comes to being financially savvy.
They are black and white for a reason – they can be followed by anyone and are not dependent on income level. I’ve purposely omitted calling out a specific savings rate – this is largely a personal choice and is often variable and difficult to stick to given life’s peaks and valleys.
If I could go back in time to meet the 22-year-old me, I would bring a print-out of this list. I think it would have served as confirmation of a lot of what I had in my mind at that time (saving and investing early does result in exponential growth) and also would have steered me out of some bad decisions.
Disclaimer: Any information shared on Bucking-the-Trend.com does not constitute financial advice. This Website is for informational purposes only and does not attempt to give you advice that relates to your specific circumstances. Besides, the last thing you should be doing is taking financial advice from an anonymous guy on the Internet named Buck.
Without further ado:
1. Always spend less than you earn – the golden rule of personal finance.
2. Invest early, invest often.
3. Invest in the following order, where able (for each working adult in the household):
- Contribute to company sponsored 401k up to the point of earning the full employer match
- Emergency cash fund large enough to cover 6 months living expenses in a single-income household (3-4 months in a dual-income household – bumped up as one of my astute commenters pointed out, enough to cover a standard 12-week FMLA absence)
- Max-out Roth IRA to legal limit
- Invest remaining savings by maxing-out 401K to legal limit
- Invest remainder in taxable accounts
4. Be generous to charitable causes that are important to you.
5. Track your net worth monthly because what gets tracked gets managed.
6. Invest aggressively in equities in your 20’s and 30’s.
7. Buy and hold for the long term.
8. Define a target asset allocation mix and re-balance toward it yearly.
9. Do not invest in individual stocks – invest in low-expense mutual funds that support your targeted asset allocation mix.
10. Do not try to time the market.
11. Do not invest in your employee stock purchase plan unless you can buy at a discount equal to or greater than 15% and there are few limitations as to when you can sell.
12. Invest in real estate only if you are handy, have the time, and are able to deal with people and their shortcomings.
13. Never pay full price for ‘want’ (non-commodity) items.
14. Avoid consumer debt like the plague. I define consumer debt as borrowing money to purchase anything that depreciates in value.
15. Pay cash for all vehicles.
16. Use cash-back or reward-based credit cards and ensure you pay off the full amount every month before the due date.
17. Attend public schools, take them seriously and get the best grades possible.
18. Go to a public university and pay in-state tuition.
19. Make at least a 20% down payment when buying a house and spend less than 2.5 times gross income on the purchase price. This is a general guideline and assumes no other debt.
20. Marry someone with similar financial habits as you – or at least someone who acknowledges they are not great with money and a willingness to learn and adopt better habits. Oh, and never divorce.
21. Never turn down an offer for beers with friends, regardless of the cost.
* Let’s face it, you are already “wealthy” by almost any worldly definition so let’s keep this in perspective. Just by reading this post we know you are:
- In a sheltered, warm place with connectivity to the Internet.
- Clothed (although maybe I shouldn’t assume too much).
- Literate and proficient in one of the most influential languages in the world.
- Probably not too concerned about from where your next meal is going to come.