1. What are some essential financial strategies you would recommend to young adults? Why?
Redefine necessity. In our materialistic, commercialized world, culture often blurs the line between needs and wants. Take a close look at your current expenses—are there things you could live without and still thrive? By trimming unnecessary spending now, you can reach your financial goals sooner. It might be challenging to see others with nicer cars, phones, or clothes, but making your own coffee, cooking at home, and waiting for movies to stream can help you save. If you practice discipline now, you’ll be grateful later.
Understand that seeking wealth is okay. While greed can certainly have negative consequences, pursuing wealth with the right intentions is different. If your goal is to build a business that creates jobs, help those in need, or provide a better future for your family, then seeking wealth ethically is beneficial.
Invest in yourself first. The most successful people are avid readers. Whatever your career aspirations, strive to be the best by consuming as much relevant information as possible. Seek out mentors and invest time, money, or effort to learn from them. Prioritize your physical health to reduce healthcare costs and enhance your overall well-being.
Act on what you learn, and embrace failure. Knowledge alone is insufficient if not applied. Implement what you learn with intensity and view failures as valuable lessons. Remember, failure is often the path to success. If you wait until you know something perfectly, you may never gain the true insight needed to succeed. If you run away from failure, it is sure to catch you. However, if you chase failure, you will most likely catch success.
Pay your future self first. The one common denominator I see amongst my clients who have enough money to retire is that they were disciplined savers. Their investment strategies may have varied, but their consistent saving played a crucial role in their success. You don’t need to have the perfect investment strategy to start investing; you just need to start.
Get out of debt and stay out. Not all debt is detrimental, but using debt to cover everyday expenses or desires can lead to a difficult financial situation.
Buy insurance. Until your wealth is substantial, you’re vulnerable to events that could undermine your financial stability. Insurance—such as car, liability, health, and life insurance—may seem costly, but it can prevent you from losing everything you’ve worked for.
2. Should someone get a financial advisor in their 20s?
It depends on your situation. A financial advisor can provide valuable education and guidance, but you may not have enough savings to justify their services just yet. Consider seeking advice from successful individuals you know, and read extensively on financial topics. You might find you can manage your finances on your own. However, if you feel you lack the discipline, desire, or expertise, a financial advisor could be highly beneficial. Choose an advisor who explains their strategies clearly and ensures you understand their recommendations. If an advisor expects you to blindly trust them, run!
3. Is investing in your 20s a good idea?
Absolutely! The earlier you start investing, the better your chances of achieving your financial goals. Investments need time to grow into substantial wealth. If you don’t develop the habit of investing a portion of your income now, you will struggle to do so as your income increases.
4. How does one build wealth in their 20s?
Apply the principles outlined previously and recognize that your 20s are a time when you can afford to take more risks. Early risk-taking can lead to significant gains and compound growth. Continue investing even when the market is down, as lower stock prices present buying opportunities. Celebrate market downturns as they can enhance your gains when the market recovers. Commit to keeping your investments off-limits until they generate enough income to cover your living expenses. When taking risks, avoid foolish investments. Index funds like the S&P 500 are a solid choice—they are low-cost and include shares of the 500 largest U.S. companies, offering relative stability. Do not rely on one source of investment and income. The average millionaire has seven streams of income.
5. How much should someone in their 20s be saving?
Save as much as possible. The more you save now, the faster you can achieve your goals. Conventional wisdom suggests saving at least 10% of your income, though some save 50% to 70% which would put you on a fast track to early retirement. If 10% feels unattainable, start with what you can—perhaps 2%. Whenever you receive a raise, allocate at least half of it to your savings. For example, if you get a 2% raise, use 1% for living expenses and add the remaining 1% to your savings. Over time, this approach will help you reach and exceed the 10% savings rate.
6. How does someone plan finances in their 20s?
Begin by eliminating unnecessary expenses from your budget. Next, determine your monthly and annual spending needs and compare them to your income. If your income exceeds your expenses, save and invest the surplus. If not, seek additional income sources, such as a promotion, a higher-paying job, or a side hustle. Revisit your budget to find further areas to cut costs—consider getting a roommate or switching to generic brands. This might not be enjoyable, but enduring these sacrifices now will lead to a better financially stable future and the ability to enjoy the things you want in the future.
7. How does someone make money in their 20s?
The simplest solution is often the best: get a job. If you’re unemployed, your full time job needs to be to find a job. Consider all job offers and take one as soon as possible, even if it’s low paying grunt work. Excel in your role and continue searching for higher-paying opportunities. Look for positions with clear paths to advancement or invest in yourself to enhance your skills for better-paying roles elsewhere. Strive to be indispensable— This way if layoffs are necessary, you are the last to be laid off, or the first to be hired by someone else if you get laid off. There is a big push for workers to not be excellent at what they do because many employers will not pay people what they are worth. This is true, but that is not the point of excellence. Excellence opens doors for advancement, better jobs, and prepares you to be competitive and successful should you decide to start your own business. Until you reach your financial goals, be open to multiple jobs or side hustles, and use your skills to generate additional income. In 2008 when it was nearly impossible to find a new job, I started learning how to twist balloon animals by watching YouTube videos. I would then make money busking. I eventually was invited to perform at parties and events. I would make $20- $100 an hour and I had a blast doing it.
8. Should someone focus on money in their 20s?
Yes, but it shouldn’t be your sole focus or purpose in life. Concentrating on building a financial strategy now can lead to financial independence sooner, allowing focus less on money later. Neglecting financial planning in your 20s may force you to focus on money later under much more stressful and consequential conditions, especially when supporting a family or meeting other obligations.
9. How can someone budget in their 20s?
Start by tracking every penny you spend. Review your bank statements and credit card transactions to categorize your expenses as necessary or non-essential. Set up a budget that prioritizes savings by deducting it from your first paycheck. If you have a retirement plan through work, utilize it as contributions are made before you receive your paycheck. Next, cover all necessary expenses. If you need to splurge occasionally to maintain your sanity, do it from any money is left over from the first two priorities.
This may seem hard, and undesirable. However, the more dedicated you are to doing these things now, the more the amount of time you have to worry about your financial struggles will be shortened. You will also find the coming decades to much more rewarding.