From 1 Millennial to Another: Honest Advice on How to Get Rich, Pt. 2

Here at The Motley Fool, we aim to help the world invest -- better. And that world includes busy and uninterested millennials who perhaps haven't contemplated investing or retirement...until now.

The Fool tends to point beginner investors to our13 Steps to Investing Foolishly. It's quite a lot of words, though, so I wrote a six-step guide tailored for beginning investors who (possibly) aren't reallythatinterested in investing. This is the second article in the series (click here to read Part 1), and it covers steps 3 and 4:

  1. Pay off debt
  2. Save and invest with the right money
  3. Always be investing
  4. Open an account
  5. Finally buy something!
  6. Keep buying things

Let's dig in.

3. Always be investing. Make it a habit to buy shares on a schedule. Once every quarter is a good rhythm for most investors. Don't just buy some stuff and expect to sit on it for 20 years and end up a millionaire. Adding to your investment can only help compound it, and compound returns are what turn ordinary people into millionaires.

Check out this graph inspired by the13 Steps.This is what you'll get if you investonly$1,200 every year and earn 8% on average -- a solid but realistic return. (Keep in mind that you could invest much more than that -- you can do way better than $100 a month, right?)

Data source: author's estimated rates of return and a compounding calculator.

Crazy, right? And observe how the money increases exponentially -- see the massive difference between 35 years in the market and 40? If that's not enough to make you believe in the magic of compound returns, just think about the fact that Warren Buffett made the majority of his billions after turning 50. And there's good news: If you start now, you have decades to invest and compound!

So you can see why investing early and often matters. Now here's how you get started.

4. Open an account.Opening your first investing account is easy and free. Right now, you probably just want to open a regular brokerage account.

  • What about an IRA account?You can also open an IRA or a Roth IRA. The acronym stands for "individual retirement account," because IRAs are built for retirement savings -- not money you might need before your 60s. In an IRA, you pay no taxes on capital gains or any dividends you receive. There's one main difference between a traditional IRA and a Roth IRA: A traditional IRA is funded with pre-tax earnings, so you get an up-front income tax deduction, but you will be taxed on all your withdrawals when you start taking out money in retirement. A Roth is funded with after-tax earnings, so there's no up-front tax break, but your money is not taxed when you start withdrawing.IRAs come with some restrictions. With a traditional IRA, you'll pay a 10% penalty on any money you take out before age 59-1/2 (with a few exceptions, including a one-time withdrawal for buying your first house). You'll also have to pay income tax on those withdrawals. With a Roth IRA, you can withdraw as much as you've contributed at any time, but if you touch any of the earnings on those contributions before you're 59-1/2, then the IRS will claim its 10% cut (but no taxes, since you already paid those).

Stay tunedThe final installment to this guide to getting rich slowly is here.Spoiler alert: The next step is to actuallybuysomething. The final step is to roll around in your piles of money, Scrooge McDuck-style. (Just kidding. It's not.) Read on!

The article From 1 Millennial to Another: Honest Advice on How to Get Rich, Pt. 2 originally appeared on

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