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Become a millionaire by saving when you're young

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"Get them to open up a savings account and, even if it's $20 a paycheck, just siphon that off so that it automatically goes in there," says Avdul.

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"The first goal is to get them to take it out so they don't have to think about it."

Downey agrees: "It's rare that people actually think to have money taken out of their check automatically every month; it can go into a money market account or a mutual fund.

"When I say that, people are just amazed. You never see it so you won't spend it."


Don't pass up free-money 401(k) plans
Employer-match 401(k) plans work well that way for many. Although some young workers bristle at tying up their money for so long, an employer match is one of life's rare free-money opportunities that are too good to pass up.

"So many people tell me, 'I can't afford the 401(k), I'll do that in a couple years when I'm settled,'" says Aretakis. "You can't afford to wait."

Say your company will match 50 percent of your contributions, up to 6 percent of your salary. And let's imagine you earn $40,000. If you agree to contribute 6 percent, or $2,400, your company would add another $1,200 to the pot. That's a 50 percent return on your money without even putting it into a risky stock fund.

On top of that, you're putting away money on a pretax basis, which lowers your income base when it comes to paying the tax piper.

"If you're getting taxed maybe 25 percent state and federal, you just made 25 percent on your money, plus whatever cumulative interest you're going to make on top of that every year by putting it into a diversified account. You can't get any better return than that," says Aretakis.

Of course, you will have to pay taxes on that money eventually, but in the meantime it can grow unfettered by taxes.

Live within your means
To find the scratch to sock away, Aretakis offers some suggestions.

Ways to increase income or lower expenses:
Get a roommate.
Work a second job.
Drive a fuel-efficient, secondhand car.
Use an online telephone service like Skype or Vonage to lower communications costs.
Cook in rather than eat out.
Ditch credit cards and use cash.

Above all, strive to live within your means -- not some Hollywood fantasy.

"Put together a budget and live beneath that budget," Aretakis advises. Open up a brokerage account and start socking money away, he adds.

"Every young person is going to want to present themselves well, drive a fancy car, but it's just not pragmatic in the early days. You have to be a lot more sensible, with the escalation of tuition and housing costs. If you don't pattern yourself well early on, you're just going to set yourself back.

"You can't be keeping up with the Joneses."

Bankrate.com's corrections policy -- Posted: Oct. 16, 2007
 
 
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