Understand your net worth
Burns says understanding your net worth and tracking it throughout your working years is the first step to retiring comfortably. Your net worth should rise throughout your working years and allow you to retire with more assets than debts.
To find your net worth, add up all of your assets then subtract your debts.
Stay out of debt
Staying out of debt is key to building wealth, Burns says. Making wise spending decisions, such as buying a used car instead of a more expensive new car and paying it off for years, can go a long way to growing your net worth. If you have a credit card, aim to pay the balance in full every month.
1. The magic ingredient in compounding is time
Compounding helps investors build wealth by generating returns on investments over time. These returns then continue to compound and help grow assets. Compounding is sometimes referred to as earning interest on interest.
Many of us know that compounding works, but we can t really understand it on a huge scale. Housel delivers some perspective by taking a look at Warren Buffett.
Buffett is well known as one of the wealthiest investors of all time, but it s not all because of his skill as an investor.
Buffett started investing when he was a kid, at the young age of 10, so his money has had decades to compound. Most of us can t go back in time and fill up investment accounts we never had, but we can start investing now. The longer your money stays in the market, the more it will grow.