In your 20s it’s sometimes hard to think about your life in 20-, 30-, or 40-years’ time. However, the choices you make now, including financial ones, can impact the rest of your life. Many people reach 40 and older before realizing the mistakes they’ve made and how much more money they could’ve had!
Don’t let yourself get to 40 and think if only I’d done this or that. Act now to start building wealth and reap the rewards when you’re older. Many people stumble through their 20s and 30s with no clue about saving, investing, or budgeting. If you want to know how to build wealth in your 20s and avoid those regrets, read on!
Why Do You Want To Build Wealth?
Before we get into the details on how to build wealth in your 20s, ask yourself why? Knowing why you want to build wealth is an important factor in achieving your goals.
Many people struggle with wealth building because they don’t have clear goals. This means it’s easy to not work as hard or to spend money frivolously because in your mind it’s not for anything in particular.
Setting realistic short-term and long-term goals is vital to your success. Short-term goals could include things like paying off debt, building an emergency fund, and maybe a dream vacation (having some fun is still important!).
Long-term goals might include homeownership, retiring early, and the ability to live off investments. Another popular goal these days is known as FIRE – Financial Independence Retire Early. The goal is to have a plan that allows you to be able to retire as early as possible and live off your investments. Some people have even managed to retire in their 30s! Incredible. If you think FIRE may be for you, then check out this comprehensive guide.
All these goals and more are perfectly possible if you take the right steps in your 20s. Have a good think about what you want now and what you might want in the future. Build a plan accordingly, but as you grow in your life don’t be afraid to change your goals. It’s likely as you age your priorities may shift and you can amend your plan to suit.
7 Steps For Wealth Building In Your 20s
The 7 steps listed here to build wealth in your 20s are all easily doable. There are no complicated strategies you must follow. It’s simply a case of planning ahead, taking the right actions, a little risk, and working hard. Putting all the advice into action will help you achieve your life goals.
1. Invest In Yourself
During your life where is your money going to come from?
Easy answer – You!
What you do when you are young regarding education, skills, and networking will impact the rest of your life. Even though you can learn at any age and it’s wise to be continually learning, investing in your education when you are young means you can start your career as soon as possible. Plus, it gives you more time to pay off any student loans.
Depending on your chosen career path, paying to get an education as early as possible can mean you start building wealth quicker. Earning from a younger age gives your money more time to grow. You can also advance your career quicker and have promotions or a raise at a younger age. However, not all careers require a formal education – many highly successful people had no formal education and blazed their own path.
2. Learn Everything You Can About Money
Can you get wealthy if you don’t understand money?
Maybe if you win the lottery you can! Otherwise, if you have no clue about money and how to manage it, you will be at a serious disadvantage when it comes to building wealth.
Learn everything you can about money. Budgeting, investing, inflation, different types of assets, wealth-building tools, and taxes are all subjects that you should understand. Knowing everything you can about each financial topic means you will make better decisions. Some things may still not work as you would like, but it won’t be because of a lack of knowledge.
3. Put Yourself First
In your 20s you should be starting your career and start earning real money. Great right! A bonus of earning is that you can help the people you love – parents, relatives, and friends may all ask for financial help at different times.
The choice is yours about helping or not. However, before helping others you should think about your own needs. Are you debt-free? Do you have an emergency fund? How will giving money to others affect your timeline for achieving your financial goals?
Think about all of this and what’s important to you. This doesn’t mean you should never help others, but sometimes you will have to say no if you want to successfully build wealth in your 20s.
4. Cut Expenses
During your teenage years, you might have enjoyed the luxury of carefree spending. Hopefully, you saved some money too but many don’t. This means into your 20s it’s now a good time to review your spending.
Start by making a detailed budget listing every expense. Go through each one to see if they can be reduced or cut out altogether. Many bills like cable or insurance could be negotiated to reduce the amount. Make sure to cancel unwanted subscriptions for things you no longer need. Gym memberships, magazines, and streaming services are all examples of subscriptions people often forget to cancel.
Other ways to cut expenses include living with a roommate, carpooling for work, and spending less on food. To save money on food, try eating out less, making your own lunch for work, and switching to cheaper brands when shopping.
Any money you can save in your budget can be put towards paying off debts, savings, and investments. Remember to check your budget regularly to look for more savings and start wealth building faster!
Learn about different types of bank accounts to find the right one for your lifestyle to help you reach your financial goals.
5. Increase Your Income
It seems obvious but the more money you have the more wealth you can build. Provided you use the money correctly of course!
Increasing your income can be done in a couple of ways. First, ask your existing job for a raise or promotion. If one isn’t available, make sure to look around for higher-paying job opportunities elsewhere. It’s important you know your worth and make sure you are compensated accordingly. Staying loyal to your employer may feel good, but in the long run, it won’t help you build wealth if there are no opportunities for growth.
The next step you can take to increasing your income is to start a side hustle. There are lots of ways you can earn extra income either online or offline. Popular side hustles include blogging, writing, freelancing, and driving for Uber. There are even companies that pay for invention ideas!
Start by thinking about your skills and check online for side hustle ideas. Sometimes a side hustle becomes so successful it turns into your main source of income!
Any extra money you can get needs to be used wisely. Paying off debts, investing, and building savings are all good uses of any extra money. For some fantastic suggestions on earning more money, check out these 10 high-income skills you can learn today.
6. Start Investing
You may think it’s not worth investing in your 20s as you don’t have much to invest. This would be a mistake. The earlier you start investing the better as your investments have more time to grow (and recover from any losses).
Investing has never been easier thanks to the internet. You can invest in stocks, real estate, cryptocurrency, and much more! A diverse investment portfolio is recommended as your risk is reduced.
Online there are sites and apps that allow you to start investing using just a few dollars a month. As you get older and start earning more, then you can always increase the amount you put into your investment portfolio. If you are not sure where to start this guide on where to start investing is a great place to begin. If your employer offers retirement savings plans, be sure you are taking advantage of any employer match and start saving for retirement early.
7. Take Some Risks
Many people put off doing things because of the fear of failing. Failure isn’t something to be afraid of and if you are going to fail, the best time to do it is in your 20s! Failing in your 20s means you have plenty of time to recover.
Whether it’s starting your own business, changing your career, asking for a raise, or any other risk (within reason) – go for it! Things might not always work out the way you’d hoped, but sometimes they will. Even if you do fail, you still have a valuable learning experience that can be beneficial moving forward.
Final Thoughts on Building Wealth In Your 20s
As you get older life goes by faster. Your 20s might seem like they stretch on endlessly, but before you know it you will be turning 40 and wondering where the time has gone!
I’m not telling you this to put you on a downer. Instead, knowing this now helps you understand why it’s important to build wealth in your 20s. As you get older, you can reap the rewards!
That doesn’t mean you can’t have any fun in your 20s, you should still enjoy yourself. Just do it responsibly!
Author: Chris Panteli
About the author: Hey, I’m Chris. I have a degree in Business Economics from the University of Liverpool, own a small fast food business and run LifeUpswing.com. I will help you to make money, save money, and think about money in a way that will give you back your freedom.
Financial freedom begins with good habits.
Rebecca & Tiago, theloadedpig.com