Smart About Money: The easy way for a young person to get rich

Nick Maffeo

It’s probably fair to say that everyone has a different definition of what it means to be rich. It’s not always about having a lot of money. But most people who want to be “rich” might generally agree that it’s about thriving by their own personal definition – flourishing and being comfortable, with good options to choose from.

Getting there in one giant leap is a very attractive dream that absolutely does come true sometimes. Maybe it will happen to you and you’ll live a great life afterwards. Hitting a monster jackpot is very, very, very rare though, and often unrepeatable. Millions have lost millions trying to get rich quick or hit that high again.

(Everyone treasures their wins and loves to talk – even boast – about them. Only someone exceptionally honest and transparent talks about their losses.)

No matter what your personal definition of being rich is, being exceptionally honest and transparent with yourself about how you’re handling your money will help get you there. Discovering how you plan to effectively manage your finances as an independent adult is a huge part of being an independent adult.

First you’ll ideally be looking for investing ideas that are pretty much guaranteed to pan out. In 2014, financial theorist William J. Bernstein wrote a piece called “If You Can – How Millennials Can Get Rich Slowly.” But it’s not just for Millennials, by any means.

Some of the specifics are dated but the wisdom is solid. Bernstein wrote: “Would you believe me if I told you that there’s an investment strategy that a 7-year-old could understand, that will take you 15 minutes of work per year, that will outperform 90 percent of finance professionals in the long-run and make you a millionaire over time? Well, it’s true.”

(Bernstein recommended saving 15% of your salary and putting in into a 401(k) plan or an IRA with equal amounts in three different index funds and an annual re-adjustment. Plus getting any 401(k) employer match.)

Getting in the habit of set-it-and-forget-it automated savings has made all the difference in the world over time for many people. Using Bernstein’s word – If – if you can do that one thing, it will probably make a big difference for you.

You may never have heard of William Bernstein but experienced individual investors and followers of Vanguard founder & mutual fund revolutionary John Bogle talk about him with respect on the Bogleheads.org forums. Which brings up another important financial reality to bear in mind.

As much as possible – in life and with managing your finances – you want to work to develop a wide range of trustworthy sources to get ideas, advice and feedback from, whether that’s online, in books (even old books) or other people.

A recent article in Kiplinger’s Becoming An Investor said: “TikTok is rife with pitches for trendy, volatile investments including cannabis and cryptocurrencies. How can you tell which TikToks to trust?” That’s a very important question to ask about every investment opportunity.

To paraphrase Dr. Ian Malcolm from Jurassic Park, you want to be “wary of the inherent dangers” while you are “earning” financial knowledge for yourself. Your goal? To limit costly mistakes while building a solid and diversified financial base you can depend on.

(Speaking of old-ish books, there’s a reason why perennial Amazon best-seller The Millionaire Next Door by Thomas Stanley and William Danko is a classic. It shows that flourishing on one’s own terms can – and does! – happen for people all the time.)

Nick Maffeo is the President & CEO of Canton Co-operative Bank – right next to the Post Office – in Canton. Have a question? Email to info@cantoncoopbank.com.

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