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Victoria, TX 77901

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The Instant Millionaire

I stopped by my neighbor's house to return a borrowed drill. Their 17-year-old son, Jerrod, took a break from analyzing Black Friday ads to greet me.

As I said hello to him, he complained that he wasn't rich yet. Although Jerrod is a smart and hardworking kid, like many people, he is always looking for a "get rich quick" scheme. As he complained about his lack of financial resources, he asked me for the latest "hot tip" to ensure overnight riches.

On my way out the door, Jerrod stopped me again. He was insistent. "How do people get wealthy?" I could tell he was a bit more serious than many of our previous, casual conversations. He already had a pad of paper and was ready to take notes.

Seeing an improved level of maturity and interest, we sat down to have a simple, but effective, discussion on how people accumulate wealth.

To begin with, you cannot expect it to happen overnight. Instead, the best way to achieve financial independence is to do so patiently and methodically, over very long periods of time. Furthermore, if you spend less than you make and invest consistently over long time frames, it is almost a virtual certainty you will become wealthy.

Jerrod was intrigued.or at least as intrigued as a 17-year-old can be when discussing multi-generational goal setting. However, he had not bolted for his World of Warcraft game, so we continued. In fact, he insisted on getting a plan. I think his broken transmission and a lack of money for a date might have motivated him a bit this time.

Recently, Zeke Ashton had told my students at Texas Lutheran University they would need $5 million to enjoy the type of retirement they would like. Jerrod's eyes got big as he said he only thought entertainers and athletes had that kind of money.

Ashton told my students that if they saved $5,000 a year upon graduation at age 22 they could easily accumulate more than $3.5 million by age 67 by earning just the average of the stock market (10 percent per year).

As I mentioned this, Jerrod told me this didn't help because I had already mentioned he would need $5 million. He was right.

Jerrod is only 17 and, although a high school senior, he works two part time jobs. He has a 50-year time frame until normal retirement age. As we re-ran the math, Jerrod recognized if he saved $5,000 a year over a 50-year time frame he would actually accumulate $5.8 million.

Originally published November 18 2014, Victoria Advocate

Obviously, he liked that answer. However, he quickly picked up on the fact that by starting just five years earlier, and investing only $25,000 more, he would end up with an extra $2 million when he really needed it.

Even for a 17-year-old, Jerrod could see this was a big payoff.

As we finished the productive conversation, I reminded Jerrod that people who truly want to control their destiny save and invest religiously in all markets. Investing success is a marathon, not a sprint. Given this, no matter where interest rates are headed, where tax rates are, or who is in elected office, it is up to him to patiently and diligently, save and invest.

Jerrod internalized the advice and asked if there was anything else. I said "Yes, throw away the Black Friday ads. There is nothing in there you can't live without and you are much better off putting money in your own pocket."

Jerrod furrowed his brow and sarcastically asked if I had already bought him a Christmas present. To his surprise, I said "Yes" and printed out an application for an Individual Retirement Account.

Although he rolled his eyes, he finally started to realize that the "instant millionaire" happens with consistent discipline and patience.

Dave Sather is a Victoria certified financial planner and owner of Sather Financial Group. His column, Money Matters, publishes every other week.