Money

Self-made millionaire: Don't put money in your 401(k)

Grant Cardone
Source: Grant Cardone
Grant Cardone

After graduating from college, Grant Cardone was broke and swimming in $40,000 of student debt, he writes in his new book, "Be Obsessed Or Be Average."

By 30, he'd made his first million. Since then, the 58-year-old has built five companies and a multi-million dollar fortune.

The self-made millionaire refuses to play by anyone else's rules, particularly when it comes to saving money.

"I would never, ever invest money in a 401(k)," Cardone tells CNBC. "Why would I go to work, have my employer give me another $6,000 a year, and then take that money and send it off to Wall Street, where I can't even touch it for 30 years? I wouldn't do that."

The popular retirement plans are "traps that prevent people from ever having enough," Cardone writes on his website. "The 401(k) is merely where you kiss your money away for 40 years hoping it grows up."

Rather than focusing on saving, focus on earning — you can't save your way to millionaire status, he says.

"Wall Street is telling you to invest little bits, early. They don't believe in your ability to earn money," Cardone tells CNBC. "People need to show the ability to produce more revenue — not invest it — first. People get rich because they produce revenue, not because they make little investments over time."

And don't just focus on earning — focus on earning big, says Cardone. "Keep stacking that paper until you have a hundred grand in the bank. I know this is very unrealistic for a lot of people, but the reason it's unrealistic is because you've been conditioned to think small."

Cardone is promoting saving the money you earn, but counter to most advice, he says to put the money in a good old-fashioned savings account — where your money is accessible at a moment's notice — until you have at least $100,000. Then, you can start investing.

"Put your saved money into secured, sacred (untouchable) accounts," he writes on Entrepreneur. "Never use these accounts for anything, not even an emergency. ... To this day, at least twice a year, I am broke because I always invest my surpluses into ventures I cannot access."

It's important to note that the median retirement savings for all families in the U.S. is just $5,000, and the median for families with some savings is $60,000, according to the Economic Policy Institute (EPI). And many families have zero saved. Employer-sponsored retirement plans are meant to help address this and are a good option for many people. But of course, to Cardone's point, they won't help you get rich quickly or invest in opportunities today.

He's not the only self-made millionaire to encourage this kind of thinking. After studying wealthy people for more than 25 years, self-made millionaire Steve Siebold found that rich people set their expectations high and aren't afraid to think big.

After all, as he writes in "How Rich People Think," "No one would ever strike it rich and live their dreams without huge expectations."