We all would rather be rich than not, but how to get there isn't always clear. One strategy is to consider advice from experts who have already achieved the goals you set for yourself.
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Tony Robbins is a great resource for this. A renowned motivational speaker, he offers financial advice, with some points particularly relevant to young people looking to solidify their path to financial independence before turning 30. shared. Let's take a look at them here.
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Become an owner, not just a consumer
According to some data, almost half of Millennials spend up to $500 each month on luxury items. Robbins believes these people have the wrong mindset: they are focused on being consumers rather than owners.
According to Robbins, if you want to achieve financial independence, you need to think the opposite way. That might mean buying Apple stock instead of upgrading to the latest iPhone this year, for example.
Robbins says you should take money you would normally spend on luxuries and put it into investments that will pay off as your company grows. That way, you can grow your net worth over time instead of holding yourself back.
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Automate your investments
Robbins also advocates automating your investments. Based on your pre-determined decisions, they should come out of your account before you touch your paycheck.
For example, if you decide to allocate 10% of your paycheck to retirement savings, set up regular contributions to your personal retirement account or 401(k). That way, you won't have to decide whether to contribute to your future every time you receive a paycheck. The decision is made automatically.
This will help you make investing a habit and is an important step towards financial independence.
Take advantage of compound interest
Robbins, like many financial experts, strongly believes in the power of compound interest. This is a process where your money grows faster the longer you invest. Harnessing the power of compound interest is an important part of achieving your financial goals.
For example, imagine you currently have $5,000 to invest in your future and can contribute an additional $200 each month for the next 10 years. If you earned 5% on your account, your total savings would be $38,331.42 at the end of 10 years. If he doesn't earn his 5% of the money he saves, he'll only be left with $29,000.
This shows how compound interest affects you over time. If you're under 30, the sooner you start taking advantage of compound growth, the more benefits you'll reap in the long run and help you secure financial independence.
For example, if you made the same assumptions and contributed $200 per month for 30 years instead of 10, you would end up saving $181,062.95. But without compounding, this number would be only $77,000.
don't forget why
Robbins knows that one of the most difficult aspects of achieving financial independence is being consistent. Just about anyone can become wealthy if they choose a smart financial plan and commit to it throughout their career. However, contributing only regularly to a retirement account will stunt your financial growth.
That's why Robbins tells young people to always keep their “why” at the forefront of their minds. Your “why” might be to provide a better life for your family, save for your first home, or whatever else drives you.
The specific goals you have are less important than your commitment to a new way of thinking. If you can do that by age 30, you've already overcome one of the most serious hurdles that prevent people from building wealth.
Diversify your portfolio
Robbins agrees with other financial experts that you need to diversify your portfolio. Everything he has he cannot keep in one place.
Robbins recommends holding a mix of stocks, bonds and real estate investment trusts. He also says holding non-correlated assets such as precious metals can be helpful, as they can reduce portfolio volatility.
If you're under 30, you can afford to take some risk on your investments. Since your goals are long-term and the overall stock market has historically gone up over time, year-to-year fluctuations in the stock market are not a concern.
As you get older, you'll want to start moving away from volatile stocks and towards a more stable income, but that doesn't have to be a decision that will take years.
Implementing these strategies
If you want to embrace Robbins' financial philosophy, the first step is to get a better handle on your financial situation. Here's a three-step plan recommended by Robbins to help you get there.
1. Create a spending plan
Robbins says you should start by creating a spending plan. You need to categorize your purchases to see where you're spending too much or too little. This will give you a better understanding of your current financial habits and help you make the necessary changes to achieve financial independence.
2. Cutback
Next, Robbins recommends looking for areas to cut back on. That might mean eating out less, canceling some subscriptions you rarely use, or scaling back things like your internet speed to reduce monthly costs.
Anything you can cut from your budget can be put towards savings or investments. If you do this for a number of years, you'll be amazed at the amount of progress you'll make.
3. Save and pay off debt
Finally, Robbins emphasizes the importance of saving and paying down debt while reevaluating your financial life. He prefers the debt snowball technique. This involves paying off your smallest debt first, then the next highest amount until you are debt free.
After all, Robbins' financial advice for young people primarily focuses on changing the way they think about money. While his tips don't guarantee you'll reach financial independence by age 30, they can help you get there much faster than if you continue using the same financial strategies you're currently using.
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This article originally appeared on GOBankingRates.com: Tony Robbins: How to achieve financial independence by age 30
