When it comes to money, your 20s are a crucial period of life that can be difficult to manage.
Perhaps you are earning more money than you have ever made in your life, but you are also beginning to pay for expenses you have never had to handle before. Additionally, you’re probably balancing a lot of financial objectives, such as thinking about pursuing further education or purchasing a home.
The self-made millionaire and star of Netflix’s “How to Get Rich,” Ramit Sethi, tells CNBC Make It that his best financial advice for those in their 20s is to set up an automatic investment.
Time is the one thing you have absolutely on your side, even though it can feel like the deck is stacked against you in your 20s — you’re probably not earning as much as you will later on, you might be doubting your career choices, and you’re probably facing a mountain of student debt. For this reason, it’s critical to begin investing as soon as possible.
Investing on a regular basis may seem daunting, particularly if you’re living paycheck to paycheck, but according to Sethi, even a tiny monthly contribution can position you for financial success.
Becoming rich in your 20s may seem like a distant dream, but with the right strategies and mindset, it’s an achievable goal. While there’s no guaranteed path to wealth, following these key steps can put you on the fast track to financial success:
1. Develop a Strong Financial Foundation
- Build Your Credit: Establishing good credit is crucial for securing favorable interest rates on loans and mortgages, which can save you thousands in the long run. Pay your bills on time, keep your credit utilization low, and avoid unnecessary debt.
- Get Job Experience: Gaining valuable work experience can open doors to higher-paying jobs and opportunities. Focus on developing your skills and expertise in your chosen field, and network with professionals in your industry.
- Create a Budget and Track Your Expenses: Knowing where your money goes is essential for making informed financial decisions. Create a realistic budget and track your spending to identify areas where you can cut back and save more.
2. Choose a Scalable Business or Career Path
- Pursue a Career with High Earning Potential: Research careers with high earning potential and align your education and training accordingly. Consider fields like technology, finance, healthcare, and law.
- Start a Scalable Business: If entrepreneurship appeals to you, explore business ideas with high growth potential. Look for opportunities that leverage technology, automation, and online marketing to reach a wider audience and scale your business quickly.
3. Generate Multiple Income Streams
- Diversify Your Income Sources: Don’t rely solely on your primary income source. Explore side hustles, freelance work, or passive income streams like rental properties or online businesses.
- Invest Your Savings: Invest a portion of your income in a diversified portfolio of stocks, bonds, and other assets. Compound interest can work wonders over time, growing your wealth exponentially.
4. Avoid Lifestyle Inflation
- Live Below Your Means: Resist the temptation to spend more as you earn more. Instead, focus on living below your means and saving a significant portion of your income.
- Prioritize Needs Over Wants: Differentiate between needs and wants, and prioritize spending on essential items like housing, food, and healthcare. Avoid unnecessary purchases and impulse spending.
5. Invest in Yourself and Your Education
- Develop Marketable Skills: Continuously learn and develop new skills that are in demand in the job market. Consider pursuing additional education, certifications, or training to enhance your value and earning potential.
- Read Books and Attend Seminars: Invest in your financial literacy by reading books, attending seminars, and seeking guidance from financial advisors. The knowledge you gain can empower you to make informed investment decisions and manage your finances effectively.
6. Embrace a Long-Term Perspective
- Be Patient and Persistent: Building wealth takes time, patience, and perseverance. Don’t get discouraged by setbacks, and stay focused on your long-term goals.
- Focus on the Big Picture: Keep your eye on the prize, and don’t let short-term market fluctuations or economic downturns derail your plans. Remember that wealth is built over time, not overnight.
Additional Tips:
- Network with Successful People: Surround yourself with individuals who are already successful in their fields. Learn from their experiences, seek their advice, and leverage their connections to advance your career or business.
- Take Calculated Risks: Don’t be afraid to take calculated risks, especially when it comes to investing or starting a business. However, carefully assess the potential rewards and risks before making any major decisions.
- Stay Positive and Motivated: Maintain a positive attitude and stay motivated throughout your journey to wealth. Remember that your mindset and determination play a crucial role in your success.
Getting rich in your 20s is possible, but it requires a combination of hard work, smart financial decisions, and a long-term perspective. By following these tips, you can increase your chances of achieving financial freedom and building a solid foundation for a prosperous future. Remember, success is not guaranteed, but with the right approach and mindset, you can significantly improve your odds of reaching your financial goals.
Why it’s smart to invest while you’re young
In general, it is better to invest your money for a longer period of time. Your investment can increase in value over time with interest, and compound interest offers even more opportunities for your money to grow. Interest increases not just on your initial investment but also on the profits from it.
This implies that your money will increase in value the longer you are able to keep it invested.
Secondly, the stock market isnt always in the green. Recessions can cause your portfolio to decline for a few months or even years at a time. But historically, it has always bounced back. Investing early allows your funds to more fully recover from market downturns.
Automating your investments can help you make investing a habit. You can accomplish this by setting up automatic bank transfers to your investment account or through payroll processing at work.
In a few simple steps, you can open an online brokerage account if you don’t already have one for investments. 401(k) and individual retirement account (IRA) retirement accounts are excellent places to start.
Additionally, Sethi notes that as long as you start, you don’t need to contribute a large sum of money.
“Even if your income is not very high, you have a great opportunity to establish healthy habits if you are in your 20s,” he says. “You can simply increase that number as your earnings rise in your 30s and 40s.” “.
How To ACTUALLY Get RICH In Your 20s
How to build wealth in your 20s?
Here are 12 key steps to take in your 20s that can lead to serious success and future wealth. 1. Create a personal budget If you want to start building wealth in your 20s, you’ve got to have a plan. Create a personal budget, then download a budget app like Mint, Personal Capital, or Honeydue for budgeting with a partner to help you stay on track.
Can you make money in your 20s and be wealthy?
Before you can make money in your 20s and be wealthy, it is essential to comprehend the actual definition of wealth and how much money is wealthy. Robert Kiyosaki, the author of Rich Dad, Poor Dad, says:
How can I make money in my 20s?
One popular method is to start a side hustle. It’s a way to earn additional income while working a day job. Some examples are freelance writing or driving for Uber. If you work hard, the earning potential here can be incredible and help you to build wealth in your 20s. Another idea is to find a stream of passive income.
Should you invest in your 20s?
Sensible investing over time is one of the easiest ways to grow wealth. It may not seem like it, but your 20s are one of the easiest times of your life to build wealth. Your income isn’t significant, but your financial responsibilities are lower.