Episode #54: The 5 BEST Ways To Build Wealth In Your 20's
This week’s episode covers 5 of the best ways to build wealth in your 20’s. Unfortunately, because no one teaches us this stuff in school, very few people ever learn these tips in time to truly take advantage of the opportunity that your 20’s presents to allow you to build wealth. I’ve always felt like this was such a shame, because so many people become interested in building more financial security when they’re approaching 30. Then they start to learn these lessons and can’t help but feel that they missed out on a massive opportunity to really establish themselves. So if you know people in their late teens, 20’s, or even early 30’s, then send them this episode! We all need to spend more time talking about and sharing personal finance information so that we can all actually start to take control of our own financial education and futures. Nobody is teaching us this stuff, so it’s time we start working on improving our financial literacy ourselves.
Tip #1: Start Saving and Investing Early
This is one of the reasons why I find it so frustrating that there is so little personal finance education in our standardized school system. By not learning this lesson early enough, so many of us miss out on this huge earning opportunity of starting to save and invest while we’re young so that compound interest has the chance to really work it’s magic and grow into significant wealth over the course of our lives.
If you can dedicate yourself to starting and maintaining some sort of savings regime, two magical things will happen. First you’re most likely going to have a savings regime for the rest of your life if you start the habit while you’re in your 20’s, whereas it’s much harder to change your habits later on if you’re not already accustomed to the idea of saving a portion of your income. Second, the money that you save and invest is going to compound and grow so much more if you start doing this in your 20’s rather than later in life. This means that you’re going to have so much more money to be financially free in your future if you start practicing this early.
And I hate to be the bearer of bad news, but no, you actually can’t make up the difference if you just start saving double later in life. That’s not how compound interest works. I’m not going into detail on compound interest here today, but if you’re not sure what I’m talking about then I recommend checking out episode #38 called the secret to building wealth with the least effort because this episode has a really good breakdown of compound interest that will absolutely convince you to start saving and investing as early as possible.
Tip #2: Set Financial Goals
So many people don’t bother thinking about their financial goals while they’re still in their 20’s because the overarching messaging to our age group is that we have time. Our 20’s are for having fun, we shouldn’t worry about money or other adult stuff until we start getting older. And while yes you should absolutely be having fun in your 20’s, that doesn’t have to happen at the exclusion of thinking about what it is that you might want later in life, setting those goals for yourself, and starting to think about what you can do to start working towards those goals now while you have the opportunity and while you have fewer expenses and obligations.
I am a huge fan of goal setting for everything in life really, but setting a few clear financial goals for yourself while you’re still in your 20’s is going to help provide you with direction, motivation, and something to work towards while still allowing you to have fun. I know it’s so cliche to say, but before you know it you’re going to be approaching the age where society tells you to start taking things more seriously. While growing up can still suck sometimes, it’s all just going to be so much easier if you’ve already been slowly and quietly working towards some of your goals instead of just spending money and telling yourself that you’ll start thinking about your financial goals later.
Tip #3: Establish a Low Cost Of Living
Start out on the right foot when you’re young, and work to create a life that you enjoy but that doesn’t cost you every penny of every paycheck to maintain.
If you let yourself fall into the cycle of keeping up with the Joneses’ this early in life, then it’s going to be really hard to break out of that cycle later on when you find that you’ve saved absolutely no money, your lifestyle costs a lot to maintain, and you AND your family are used to a certain lifestyle.
If you ever feel yourself falling into the trap of keeping up with the Joneses’ and needing to buy that new thing that instagram’s been targeting you for, here’s a little hack you can use to switch your brain off of spending money mode. Remember that your 20’s is basically the only period of your life where you get a free pass for being cheap and grungy in the best way possible. Your 20’s is when it’s actually cool to shop second hand for your clothes, and furnish your apartment with weird crud you found at value village. It’s the time of your life when it’s actually fun and rewarding to live with friends rather than on your own, and when you’re actually expected to drive a beater car.
Use this to your advantage and create a low cost of living for yourself in your 20’s. Create the habit of living frugally, and saving money by spending less than you make. This isn’t to say that you should eat only potatoes and rice, but by all means use this opportunity to teach yourself that it’s entirely possible to create a life you absolutely love that doesn’t cost you everything. The best way to experiment with this and find your happy medium lifestyle for what you earn vs what you spend is in your 20’s. Don’t miss this opportunity.
Tip #4: Improve Your Career Skills
Having good financial habits is more important than income level when it comes to building wealth. That being said, once you’ve created good financial habits like saving and investing, then the best way to build wealth is to increase your income. And increasing your income usually comes from improving your career skills. You need to improve your skills so that you can either bring more to the table at your job, move to a better position, or start your side hustle and business ideas that will help you break out of the 9-5 paycheck system. Whatever the right path is for you, the key is that you consistently and actively work on getting better at what it is that you do, and find ways to bring more value to the table.
From there, practice being audacious and asking for what you think you deserve. Practice expressing the value that you bring to your work, or to a job for your clients. Don’t be afraid to move positions to a better salaried offer if one comes available, and don’t be afraid to keep your net wide when it comes to finding new positions. The age of the lifetime career with one company is long gone, so don’t feel held back by loyalty to a company just because that’s where you started and people have told you that there’s value to being a ‘lifer’.
In my opinion, one of the best ways to improve your career skills and increase your income is to learn and practice something that will help you start working for yourself. If you’re remotely entrepreneurial in nature, the opportunities for starting businesses and side hustles these days are endless. So, always work on learning something new and improving, and it will absolutely start to translate into higher earning potential over the course of your life.
Tip #5: Commit to Learning About Managing Your Finances
This might be the most important part of the whole episode. I started out by saying that we’re not taught personal finance skills in school, so it’s on us to educate ourselves and work on improving our own financial literacy. Sounds kind of scary, I know, but this doesn’t have to be a huge undertaking!
You don’t need to learn the ins and outs of stock marketing analysis. Learning more about managing your finances could be as simple as picking one personal finance book to read every year, reading it in January, and then spending the rest of the year implementing some of the skills you learned in that book. You don’t need to go out there and learn everything all at once and manage your money perfectly from day one onward. There’s a lot of time to learn in this first decade of your adult life, and you’ll be amazed by how far you can get and how much you can learn if you just slowly and consistently work on learning a new lesson, applying it to your life, and making that become a habit before moving on to the next lesson.
You can pick up books, follow finance educators, or enroll in a finance course. The ways that you can choose to learn are endless and can take as much or as little time as you want. All that I ask is that you commit yourself to learning some basic personal finance skills in your 20’s, so that you don’t arrive at the next decade not knowing if you’ll be able to get approved for a vehicle loan or a mortgage. If you’re interested in starting with a great book to learn from this year, I recommend picking up a copy of the wealthy barber. I highly recommend starting with this book to understand the overarching principles and goals of personal finance before you start on anything else.
And that’s it for today! I could have made this a massive list but I didn’t want to overwhelm you so I stuck with the 5 tips that I think are the most important to learn and put into practice if you want to start building financial security and wealth in your 20’s. Trust me, future you is going to thank you for putting even one of these tips into practice, so if you feel like you can only handle starting with one at a time for the time being, let me know which one you’re going to choose in the comments below.
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