You gotta love it when the generations come together.

We recently spent a few days over the summer with my wife’s family. My father-in-law and I often bond by complaining about money.

Lately, his axe to grind is the water and electricity bills. Living in the most expensive city in Texas, they’re running about $900 a month (combined) in the middle of summer.

Mine: childcare. We’re paying the equivalent of my first mortgage, not even for full-time care.

Still, it could always be worse. We are fortunate to have made some good decisions that got us to where we are. Among them are marrying out of our league, buying real estate, and investing early (and often).

I bring this up because I’ve had similar discussions with my colleague Nathan Slaughter. Below, he weighs in with advice for investors who are just starting out, and more. My questions are in bold.

School just started in many parts of the country. What would be your advice to young people in college (or just out of college) who are just getting started?

Those days are long behind me, but I’m still aware of the challenges. I have one kid in college right now (and another not far behind). Both will be entering the workforce soon. Here’s what I will tell them…

1) Don’t get hooked on debt. The average student borrower has already racked up $37,000 in student loan debt. Many owe $50,000 or more. That means you should avoid any additional debt like the plague. Better to invest instead.

2) Don’t buy any company you don’t thoroughly understand. Make sure you clearly understand how a company makes money and whether the economic environment seems favorable for the stock to perform well. You’d be surprised how many people don’t even check a security’s home page or read through the latest press releases and earnings reports. And if you don’t have time for that, then there’s nothing wrong with an index fund.

3) Don’t try to time the market

I know it can be tempting to try and catch the next big bull run. It’s equally enticing to hit the “sell” button when things get dicey in the market. But if you’re wrong, the consequences can be disastrous.

To see what I mean, take a look at this chart. If you had missed out on only the 10 best-performing days in the S&P 500, your overall returns would be cut in half. Ouch.

_{Source: Visual Capitalist}

Studies show that most individual investors sell too early and miss out on huge rallies. Or, they don’t get greedy when others are fearful and pile into the market when it’s flashing red.

The moral of the story is this… Stay in the game. Over the past 20 years, you would have earned 9.8% just by parking your money in the S&P 500 and forgetting about it.

4) Prepare to get rich slowly. Invest a small amount at first. Don’t feel like you need to bet the farm. You have plenty of time.

Investing is a lifelong learning process. Just like life, sometimes you’ll be successful; sometimes things may not work out as expected. It’s a game of trial and error.

But here’s the upshot: The easiest way to gain wealth in the market is to invest for the long term and take advantage of the magic of long-term compounding.

You do this by systematically investing in high-quality stocks and funds. Set up an auto-draft from your bank account to your brokerage and automatically purchase a little bit each month. This is easy to set up with many online brokerages.

Any little bit of money you can put to work now — no matter how small — can have an extraordinary effect on your wealth.

Then, hold on for the long haul and reinvest your dividends (again, you can have your online brokerage do this automatically). By plowing your dividends back into more shares, you can turn the magic of compounding into overdrive.

The odds are so kind that it’s hard not to come ahead. I am constantly amazed that more investors don’t take advantage of this.

Credit card debt recently hit $1 trillion for Americans. What should we make of this?

I think that speaks for itself in a lot of ways. As I mentioned recently to my premium readers, weary consumers have been opting for plastic on even the most routine of purchases lately, including rent and utility payments. From April through June, Americans ran up another $45 billion on their cards.

Believe it or not, that $1 trillion is just a drop in the bucket. If you include other household debt, such as car notes, the total tab has risen by $3 trillion since the pandemic and now stands at $17 trillion.

_{Source: NY Fed}

Having exhausted other options, many workers are making emergency withdrawals from their retirement accounts (rarely a good idea) to make ends meet.

What’s your outlook for the rest of the year?

Well, on the upside, the labor market remains robust and average wages continue to inch upward. But keeping pace with inflation has been an arduous task. Many noted economists, including Wharton Professor Jeremy Siegel, believe households are depleting their last reserves this summer and could be tapped out by fall. Bond king Bill Gross has echoed that sentiment, reminding that the last drops of $4 trillion in Covid stimulus measures are “dripping into the economy.”

Let’s not forget that consumer spending accounts for roughly two-thirds of GDP.

We may already be seeing a taste of this, as discussions between manufacturers and retail distributors show some reluctance for customers to pull the trigger on big-ticket discretionary goods. None of this implies that the sky is falling. But taken with other macro headwinds, it does shift my near-term outlook a bit further into bearish territory. So expect to see more profit taking (and cash raising) over the next couple of months.

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