How to start investing in your 20’s so that you can become a millionaire by your 30’s. There are so many articles and books written about it. And, of course, they all offer something a little different.
In this article, I’m going to discuss all the different areas you can start investing in your 20’s things that will benefit your future self.
Reaching your 20’s may not seem like a big deal. After all, you still have ten more years till you hit the age that seems to always make headlines in every Cosmopolitan magazine. You may have only finished college, have plans to take a gap year instead of seeking higher studies, or maybe you just want to chill at home. Whatever it may be, there are tons of stuff you can now start doing in your free time.
Your 20’s are the ideal age to think about your present and of course of your future from a financial perspective. Your future self will thank you for this. Here are all the things you need to know about investing in your 20’s so that you can sit back and relax later.
Investing In Your 20’s
Investing is one of the most important things you can do to enjoy your financial freedom. If you are in your 20’s, you are probably wondering how and what to invest your money? In the rest of this article, you will learn:
1. Why you should start investing in your 20’s
2. What to invest in your 20’s
3. How to start investing in your 20’s
Start Investing In Yourself First In Your 20’s
Your 20’s is an ideal time to acquire the knowledge and skills which is essential to become successful. It’s estimated that Many modern-day successful and wealthy people dedicate 80% of their working day to reading. You need to read a lot to improve yourself on a daily basis. Part of that improvement is acquiring more knowledge and experience. If you can afford it, go to a college and study your preferred subject. However, if you think going to college won’t take you anywhere, don’t go to college. Take online courses. Join seminars, retreats, and apprentice programs in the skilled trades. If you ever change your mind, you can always enroll later.
Commit to educating yourself about your finances. Read a lot of personal finance and nonfiction books. I would recommend that you start with Tim Ferriss’s book The 4-Hour Workweek: Escape 9-5, Live Anywhere and Join the New Rich. You will learn a lot about how to start working smarter, not harder.
Also, educate yourself about:
- Economics ( How The Economic Machine Works by Ray Dalio )
- Business ( How to Start a Business with No Money? )
- Networking ( Introduction to Networking )
- Marketing ( Secret Formula of Sales and Marketing )
- Human Psychology ( Simple Psychological Tricks That Always Work )
- Business Psychology ( Tony Robbins on the Psychology and Skills )
- Healthy Habits ( Healthy Habits to Set Before You’re 30 )
- Productivity Hacks ( Simple Habits for a More Productive Life )
The Outcome: Getting wealthy begins you. Your thoughts and habits are the foundation of your financial future. And investing in these things in your early 20’s will take you to the next level.
Focus on Making More Money
The 2nd most important step is to try to diversify your income and make more money. Don’t put all the eggs in one basket. Your 20’s is the ideal time to develop multiple streams of income and maximize your income.
Thre are a number of ways you can make some extra money fast. A great way to do that is by doing freelance work. You’ll find a variety of online freelance jobs on sites like Upwork, freelancer, Fiverr, Peopleperhour and Guru.
You can find freelance jobs like:
- Website Design
- Search Engine Optimization
- Virtual Assistant
And so many more.
There are also some easy ways to make money online like filling out simple surveys online and online betting. However, the most practical way to make money online is to create your own products and sell them online. If you have some expertise in a high demand topic, then you can develop an online resource like a blogan ebook, an online course, or a how-to video on Youtube.
There are also ways to make extra money on the side offline. You can join ride-sharing companies such as Uber and Lyft and make money driving for them. Make money by performing tasks for other people on TaskRabbit, delivering food for Instacart, or doing babysitting tasks on UrbanSitter. These side hustles are great because you have the flexibility to work on your terms. You can work on a schedule of your own choosing and put in as many hours as you want.
The outcome: When you diversify your income sources in your 20’s, you can have more choices in your 30s. In today’s competitive world, you won’t make much money overnight. To win the game of wealth, be patient.
Save to Invest, Don’t Save to Save
The next thing to do after you start earning some money is to save it. It is no doubt that a 20-year-old won’t have an overflowing earning system. Maybe you won’t even have more than 500 dollars at hand. And that is completely okay.
The point is to not become a millionaire overnight but to save up little over time and achieve something big in the long run. Create a savings account at your bank. This will definitely assist you with any inconvenient money issues, in the present, and for the future.
The outcome: Suppose you do exactly that and invest $250 every week. At the end of the month, you will have saved up $1000. Who wouldn’t like that? Slowly increase the amount invested. Even if it only goes up to a thousand dollars at most, you will still be saving $4000 a month!
Start Taking Calculated Risks
Your 20’s is probably the ideal time to start investing money. Because you likely have very few commitments in your 20’s. So take some risks and go where the opportunities are. Take a chance. What’s the worst that could happen?
Try to understand and take advantage of these four important investing concepts
Put aside something for your savings account and take calculated risks along the way. Try to create a habit of investing as early as possible in your 20’s. For example, open an investment account and start contributing to your account around $100 on a weekly basis. If you want to grow your money, you need to set a clear goal and a specific plan to achieve that goal. Money won’t just appear — you have to work at it.
The outcome: One of the greatest aspects of investing in your 20’s is that you can take as many risks as you like. If a risky investment turns out to be unsuccessful in your 20’s, for example, you’ll have years ahead to fix these mistakes.
Set Yourself up for Success with Goal-Setting
Goal setting brings yourself one step close to your financial freedom. This might seem like a hard thing to do in your early 20’s. But if you really want to achieve your goal, you need to create some changes in your present.
One way to achieve this plan is to adjust your lifestyle now. Try to understand where your money is going. Then prioritize your spending, traveling, and everyday investments accordingly.
However, this does not mean that you have to forego all the fun and excitement you could be having now. Maybe if you prefer traveling and eating out quite often, try to change it to once a year and twice a week respectively.
Another important part of investing in your 20’s is to commit. Invest even when you don’t have much savings. That’s because of compound interest you can accumulate much more money than you ever thought possible.
It is very easy to slack off on saving up a little daily, especially if you are someone who is always on the go or have a lot of distractions around (the kind you need to spend money on). But if you are committed to your future planning, absolutely nothing can change your decisions anyways.
The Outcome: By the time you reach in your thirties, you will be able to pay off any previous student loans or personal debts. That house in the suburbs you always hoped to own one day? Guess what, you will have saved enough to buy it and renovate it!
Find a Career in Your 20’s
As hard as this may seem to be, it really is not that big of a deal in finding. With the economy changing and updating drastically, you will be surprised to know that there a lot of employers now who are ready to invest for their employees in a long term manner, in return for their work being done.
Yes, in some cases this does mean you will not be receiving your complete salary. But it also helps to add up cash in your investment account without any hassle or worry of funding at all.
One significant way to do this is to find a work-sponsored 401(K) plan and have the funds deducted from your monthly payroll. If you do not like the idea of all your salary being transferred into your investment account, speak to your employer about deducting a considerate percentage from it only.
Not only will you have a part-time/ long-term job at hand which will most definitely be a bonus on your future resume, but you also have that financial security. This is a huge benefit if you take into account the job instability and unemployment rates that are currently on the rise.
The Outcome: Accept whatever your employer is choosing to offer. Chances are this will be enough to create your first official account for long term savings. To create long term savings account you might have to meet a few necessary requirements financially.
This proves that you are not a liability or will not become one in the near future. Hence, receiving whatever you get from your employer will be of great assistance if you manage to save that up and use it to meet those requirements for your next official future planning.
Get Started Investing
Now that you have taken the first step in investing money in your 20’s, discuss your plan with a proper guide or possible investor.
The easiest way to get started investing is to open up an Individual Retirement Account(IRA). There are mainly two prominent IRA features; the traditional way and ROTH.
The traditional way allows you to contribute to your account on a pre-tax basis, which means you will not be taxed up until the moment you withdraw the cash. On the other hand, the ROTH system has your money added into your account after you pay the taxes. So, in turn, your withdrawals are absolutely free.
In order to choose which account system to go for, it is better if you consult a trusted investor or guide beforehand. However, a lot of experts have claimed that it is wiser for a 20-year-old to choose the ROTH system over the traditional one as your tax rates in your 20’s are going to be much lower compared to when you retire.
Even if you don’t have much income, you can start growing your wealth. Bond is a good way to start investing without much money. Also, relying on bonds is significantly less risky than investing your money in stocks. While they won’t make you wealthy overnight, you will get great returns in the long term. You can use that money to invest in a real estate property at a later point in time.
The Outcome: Unlike an emergency funding account, an official IRA will help you keep track of your daily investments, the compound interest you possibly will be receiving on that amount of yours, and also not have to worry about your savings being affected by market and economic fluctuations.
Connect With Your Mentor
In life, especially when your goal is to be a millionaire, it is important to hang out with people that you believe will help you get there. By being among successful people, you will learn the tricks to be successful.
Finding the right financial advisor is another most important part when it comes to investing money in your 20’s. It may seem counter-intuitive to invest in a coach. But it is an investment in your education, and the ROI can make it your best investment ever.
Thanks to technological advancements, it is now very easy and convenient to find what is known as a Robo-advisor. They are basically advisors a 20-year-old can find online for minimum cost. These Robo-advisors provide a lot of information and resources for young investors at a reasonable price.
However, if you are comfortable with dealing with someone solely online, you can surely look for a financial advisor in websites like Upwork. You will find some skilled financial advisors there with minimal effort.
Actual advisors are indeed slightly more expensive to deal with, but they are also physically present to deal with any issue or abnormality of your account from your side personally. They will work to provide you with only the best resources and advice, and also help you find the most fitting brokerage accounts.
The Outcome: Planning a future investment is definitely not fun. In fact, it can be quite a bore. A professional financial advisor will help you stay rooted to your cause. They will be there to assist you with any financial confusion you might have and then solve them.
Invest in Short Term Savings
Just like emergency funding accounts, keeping an official short term savings account can be a great idea too.
If you are someone who is not planning on creating an account up until retirement, but instead for the near future only, then a short term savings account might be the best choice for you.
If this is the case, then you would want to keep your money somewhere that is obviously easily accessible but somewhere that is also not prone or subject to random market and economic fluctuations.
Even though the amount of cash saved might differ greatly from a long term investment plan, accounts such as high yield savings accounts, money market accounts are still really great options for investing into.
Short term savings accounts are great if you wish to save up money but also put them to use after just a few years at the same time. You will have enough saved by then, and you get the proper value back on your saved cash as well.
The Outcome: Short term savings accounts are great if you aren’t confident about investing long term. You will still be saving, creating a good habit and be budget-conscious at the same time.
Learn to Resist Emotaionl Spending Temptations
This might seem like a completely unrelated trip, and maybe it even is. But it is very important to learn how to ignore the everyday distractions and financial temptations around us.
Social media accounts deliver a rosy made-up picture of random strangers and quite possibly of your friends and family members too where they are wearing flashy accessories, living the high life. As casual as it may seem, for a 20-year-old working to save up cash, this representation of high life can be quite frustrating.
You might even be tempted to let go of your future plans and just give in to the moment. This fear of missing out in the present can possibly damage your future.
These by in no way mean that you cannot possibly experience the same things your friends and acquaintances are experiencing. However, when you know how to ignore and control your budget properly, you will also find the right time to indulge in those same activities as your friends. The only difference? You are quite possibly more financially stable than they are.
The Outcome: Not losing sight of your main goal shouldn’t be something that only caters to the financial sector of your life. But it does play a rather big role in your financial aid plan.
If you can get past the distractions and temptations, you are set to have a comparatively carefree and financially stable future than that of your peers.
Once you reach your twenties, you can either sit back and play it by ear, or you can be one of the conscious few and take charge of your approaching future.
Your 20’s can be a confusing phase in your life, both emotionally and mentally. But if you take a step forward and invest in those above-mentioned things, it will surely benefit your future self. Or at least you won’t t have to worry about the financial sector of your life.
Mapping out your retirement plans now may sound boring and unnecessary, but it really is a smart choice. How you will spend your life at 65 may very well depend on how smartly and consciously you live your present. And this definitely applies to your retirement plan financially as well.
Saving now can greatly shape your future lifestyle and how much comfort you can derive from it. The longer you wait on investing and setting a future financial goal, the more expensive and harder it will become.
The sooner you start investing in your 20’s, the more opportunities you will receive later. So start small but start now. One day you will thank yourself for doing that.