How-To Invest Money In Your 20s

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I can to help you master your money and build your wealth. Today we’re talking about how to invest money in your 20s. The 20s are probably the best time in your life to live it up. You just graduated college or you just got a full time job. You don’t have that much responsibility compared to how much income you’re bringing in. And now you have a lot more freedom. This is like college on steroids almost. However if you do things right during your 20s you’re going to be able to set yourself up financially for life if you just develop some good habits.

So in this post I’m going to teach you how to invest money in your 20s. I want to break this down into seven easy steps for you to follow.

Number One: is take advantage of compound interest
When you’re in your 20s you probably think like you have so much time or so many decades to be able to save. So why start now. Right. That’s because you have the power of time on your side. You have something called compound interest which Albert Einstein dubbed the eighth wonder of the world.

Here’s a great example. Let’s say you invest 300 dollars per month starting at age 20 and don’t stop until you’re 60 years old. If you managed 8 percent return during that time you would have more than one million dollars in that account alone.

Now let’s say you waited until you were 30 to get started. By the time you reach 60 years old you would only have four hundred and forty thousand dollars in your account. Those first 10 years you missed out on it would cost you more than five hundred and fifty thousand dollars in returns. Even though you only skipped 36 grand and 10 years of deposits.

The way compound interest works is that it’s the interest that you accrue when the interest you earn on your savings or investments begins to compound on itself. So think of it like a wave or a tsunami getting bigger. The water builds on itself until it gets huge or until you retire or until it destroys a small city off the coast of Thailand.

Number Two: realize that money is a tool
So use it as a tool to create the lifestyle you want instead of using it as something that’s just going to pay your bills and help you get to the next week or the next paycheck trading time for money and a job is probably not the way that most of us want to live our lives.

So while you’re in your 20s and you don’t have as much responsibility think about using your money and have that work for you. You need to create assets that create money for you every month or every week. So for example take a look at a dividend stock or a rental property if you want to use the example of a dividend stock you can take a three percent yield and multiply that by let’s say one hundred thousand dollars over the course of saving up that’s going to net you 3000 dollars throughout the year. That’s an extra 3000 dollars that you just created out of doing nothing literally passive income. And if you get to the point where you earn a million dollars and put that into that over the course of time you’re going to be getting back. Thirty thousand dollars a year. That’s actually a full time income for some people and you haven’t done anything but invest. So that’s your money working for you. So realize that money is a tool.

Number Three: ramp up your savings as you age
So the 20s although you don’t have that much responsibility you’re trying to save up for a lot of things whether is travel a house a car you may even have a newborn on the way. You need to be able to pay for all those things and still save. So you want to live your life and have a good balance as well financially. A lot of people they say you know start with 1 percent a year when you’re 20 years old. So you save 1 percent of your income when you’re 20. So by the time you’re 30 years old you’re saving 30 percent of your income. I think that number is a little bit too low to be honest with you. And I think the more you save earlier the more it’s going to compound over time. So I would recommend starting saving your gross salary or gross income at 5 percent and then increasing that by 1 percent per year. So by the time you get into your 30s you’re going to be at 15 percent of savings. This isn’t a help you in the long run. So by the time you reach your 30s or 40s you may be getting pay raises or bonuses. You’re not even miss that lifestyle and you’re still going to be saving up that money. And again you’re going to be living the same way as you already are. So you’re not sacrificing lifestyle for savings.

Number Four: ignore all the Joneses in your life
And the Kurdish regions and pro athletes and rappers and all that stuff. So everyone likes to live like that because they see it on TV. But at the end of the day there’s no substance to the lifestyle material things are most likely not going to keep you happy they’re just going to be a bandaid over a deeper issue.

You need to enjoy things like Family Health time. Those are things that you can’t pay for. So stop trying to keep up with the Joneses because the Joneses are broke. Everybody has different personalities tastes you know risk tolerance things like that and you need to account for that when it comes to your personal lifestyle. Again that’s why it’s called Personal Finance.

Number Five: Invest in yourself
So investing in yourself whether through books or education is probably the number one investment that you can make. My mom always said they can take away material things from you but they can’t take away what’s in your head. And I agree with you 100 percent. So read as many books as you can when it comes to finance self development things like that. Forget about the cheesy books that have no substance they’re all just filler that make you feel good you need to get books that have actionable plans. The books that I recommend are thinking Grow Rich by Napoleon Hill The Intelligent Investor by Benjamin Graham and also the Millionaire Next Door by Thomas Jay Stanley. These are three books that I’ve read early on in my life and they’ve helped me greatly.
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