Masters Series: Two Simple Rules All 20-Somethings Should Know About Money

Editor's note: In today's edition of our weekend "Masters Series"… some words of wisdom from Porter Stansberry himself.

Porter is one of the smartest businessmen we know. He founded Stansberry Research in his late 20s and built it into one of the most successful financial publishing companies in the country. So when he speaks about how to grow wealth, we listen…

In a recent episode of his weekly radio podcast, Stansberry Radio, Porter talks to a growing segment of his audience: 20- to 25-year-olds. In the following edited transcript, he discusses how these "20-somethings" should begin on the road to wealth…

Two Simple Rules All 20-Somethings Should Know About Money

Porter Stansberry and Aaron Brabham, Stansberry Radio

Aaron Brabham: So Porter, it turns out we have a new demographic we never sought to attract... the 20- to 25-year-olds.

I love it, personally, because I feel like this could be the next generation of conscientious voters and good investors. These people could have some good sense about them if they keep listening to Stansberry Radio...

Porter Stansberry: Oh, come on. What were you doing when you were 22 years old? You were not listening to financial podcasts... you were listening to Howard Stern.

Aaron: Well...

Porter: Either way, I've got something to say to the young kids listening to the show. I actually think it's great. The young people who I correspond with seem to be extremely smart, very normal people...

For the young folks out there, the single most important thing you can learn, at your age, has nothing to do with investing, per se. It's simply this:

• Live beneath your means.
• Do not borrow money.

It's that simple.

If you just go to work every day, try your best, build a career, and save money – save 20%-25% of your income – and don't get into debt, by the time you are 35 years old, you will be well ahead of the game.

By the time you're 40, you can be a millionaire, easily. And you don't have to do anything with investing beyond corporate bonds, municipal bonds, and local real estate deals. There is no reason for you to become a stock trader or an options seller or anything like that. You don't have to do that, and I wouldn't recommend you do it until you can do it full time.

Now, let's say you're 55 years old and you're retiring. You've got 40 hours a week to spend on your investments. Fantastic! You can do the options stuff. You can start getting into the junk bonds. You can learn to trade the junior mining stocks, which is hard to do but can be very lucrative.

But if you're 20-something right now, don't waste your time and energy with all that stuff...

You can read about it, you can learn about it. That's great. But just focus on increasing your income by building a career and/or having a part-time business of your own and living beneath your means.

Now here are some easy things to avoid: Don't ever borrow money to go to college. College is a waste of time to start with... Why would you borrow money to waste time? It makes no sense.

Secondly – and this is the trap that a lot of people fall into, Aaron – they want a huge house. They're 28 years old, they're 30 years old… They get married. They have a kid, and they believe, therefore, they've got to have a house – the house. And they go crazy into debt to buy it.

Don't do it. I swear, you don't have to do that. If you just focus, instead, on living within your means, you can buy a small condo. You can live there for five years until you can afford to buy a small house. And by the way, I said buy. I didn't say "mortgage." I said "buy."

If you become dedicated to never getting into debt, your entire financial life will be brilliantly successful. If you can't avoid the temptation to get into debt, there's a 50/50 chance that you'll never make it. So what's the best thing you can do to increase your odds at financial success?

Simple. Live within your means… avoid debt. But guess how many listeners will follow that advice...

Aaron: I hope at least one does... because guess who didn't do that? This guy. Two thumbs pointing up at myself...

I was in a sales career path. And sales dangles the carrot in front of you because you can make some good money. Man, it is nice to get those big checks, but then... you want to keep up with the Joneses. You've always got somebody – maybe one of your friends – who's a little bit better off than you, who you're chasing after. It will get you off-track quick...

But I'm a minimalist now. You know this, Porter. Now, I save like crazy. I live way below my means. I have zero debt, and I've never felt better. I sleep better now than I've ever slept in my entire life.

Porter: The thing I want to tell young people is that unless you can do it on a full-time basis, you don't need to start investing yet…

Sure, some of your money should go into high-quality, blue-chip, dividend-growing stocks. Absolutely. That's part of your savings program. You can do it via your 401(k). You can do it with an IRA. I'm not saying avoid stocks altogether. But I'm saying most of your money should be in corporate bonds, municipal bonds, gold, silver, and rental real estate.

More importantly, figure out how to avoid being in debt. There is an easy way to do it. Just say, "I'm not going to borrow money." Then, everything else in your life will become a lot more simple… You're not going to be shopping for a new car, for example. You could buy a decent car for $2,000. Why would you borrow $20,000 to buy a new one? It makes no sense.

If you really want to be rich, the first step is: Don't ever borrow a penny. As soon as you understand interest, you will only be a lender. You will never be a borrower. Out of all the things I did right financially, that was the most important one.

The second step was I was dedicated to always working for myself. And if you can put those two things together, you can be rich by the time you're 30.

But I'll tell you this. There is more to life than being rich. And, Aaron, you know me… you know my story. I gave up on lots of other things in my life... for many, many years.

Aaron: A decade.

Porter: But this is what I wanted. I wanted to be rich, and I sacrificed everything else to get it. There are people out there who are 20 years old who are listening, who say, "Yeah, that's what I want to do, too."

Aaron: But they're not willing to make the sacrifices or have the dedication to achieve it.

Porter: Right. Guess how many credit cards they have in their wallet...

Aaron: As many as the offers that they've received in the mail.

Porter: Exactly. So don't tell me that you want to be rich and then tell me that you borrow money all the time. Because you're just fooling yourself.

Editor's note: Each week on Stansberry Radio, Porter and his co-host Aaron Brabham provide investment ideas and a view of the world you won't hear anywhere else. You may not agree with everything they say, but we guarantee it'll get you thinking.

In the most recent podcast, investment-publishing legend Dr. Martin Weiss discusses what he sees to be the coming U.S. depression… To hear the interview with Dr. Weiss, click here. You can also download all Stansberry Radio episodes from iTunes here.