I explain the top 7 things people in their 20s can do to become wealthy in their 30s!
I know times are tough, but with a little hard work, discipline, and some luck, you can be on a path to sustainable wealth!
One: Save Money!
Three: Open a Roth IRA
Four: Invest Wisely
Five: More Income Streams
Six: Pay Off Debt
Seven: Take Risks!
Winter might be coming as in you never know when s*** happens! Make as much and save as much money as you can. In this current frothy market environment, I suggest having a money market account that’s FDIC-insured to earn a little bit of interest so you’re not completely losing its value to the dumpster fire known as inflation.
Whether you consider it an emergency fund or not, it helps to have saved funds in case of the unexpected. Unlike what some might have you believe, only saving 10% of your income might not be enough for retirement. 20% is a little better, but that’s assuming you retire by 67. If you want to retire even earlier, like at age 50, then 20% isn’t enough, you’re going to need to either generate higher rates of return like 15% or save more like 37% of your income at the average stock market return rate of 10%.
Go to college at a price that makes sense if you don’t know what you want to do in your life and you don’t want to start a business at age 18. I strongly urge you not to overpay for college because there are so many people with lots of student loans, it’s debilitating, and difficult to generate wealth when you’re weighed down by student loan debt.
Sure, you could be working instead of going to college, but your job options and the amount you could earn may be limited when you don’t have a college degree. When you’re trying to make money, try to find a balanced intersection between a career that can get you a decent amount of income and your own happiness levels. There’s no point in making as much money as you can if you’re not happy.
It may be difficult to prove the exact value of a college degree, but it might deliver returns of 15%+ per year, which is better than the stock market’s 7-10% return or bonds, real estate, and gold all being at 3% returns each.
I didn’t even mention the intangible value of college where you sometimes make lifelong friends, have unforgettable memories, and so much more. But just like not all investments choices are good decisions, not all college degrees are worth all the student loan amounts in the world.
The annual median earnings of someone with a college degree are a whopping $17,500 more than someone who has a high school degree. If you paid $70K for a college degree, you break even after 4 years.
I opened a Roth IRA as soon as I turned 18, and I would later get 401ks and HSA as well, which are good to have too, but the Roth IRA is the most accessible to most people in their 20s.
Do the best you can to contribute as much as you can within the tax year deadlines. You don’t have to invest the cash right away, it can just sit in the Roth IRA until you find a good investing opportunity.
Two things if you remember nothing else: 1) Tax free investment returns, and 2) No taxes during retirement starting at age 59.5! Nuff said.
I strongly encourage people to invest wisely and not give in to FOMO. Check yourself if at this point in time in the markets, if it makes sense to invest or if you should spend more time learning how to invest before you buy equities or other assets.
I’ve been there and done that with investing in index funds, target date index funds, roboadvisors, and they’ve all led me to wanting to achieve more than the average you would normally expect with index funds. This is a road less traveled, and it makes me partial to the way that Warren Buffett invests because it makes sense to me.
Berkshire Hathaway has been able to generate compounded annual rates of return of 20%/year from 1965 through 2020, over 55 years handily beating the S&P 500’s average yearly 10.2% rate of return that includes dividends.
They say you should take more risks when you’re younger and have more stocks than bonds in your portfolio, but I think that unless bonds come back to the levels we last saw in the 1980s, I wouldn’t bother with them. Even Warren Buffett’s second wife Astrid is 90% in equities and 10% in bonds, and she’s 75!
I would stay as much invested in equities or hold cash until I can invest it into more stocks when companies go on sale.
If you’re going to buy equities, assuming you’ve done your homework, then Buy and Hold for as long as possible, ideally forever like Buffett likes to do.
I wish the Invested book by Danielle Town and Phil Town existed when I was in my early 20s, because it taught me how to invest like the GOATs Buffett and Charlie Munger. They also have a podcast. You can also watch more of my videos on what Buffett & Munger are up to!
Then again, sometimes making mistakes is the best teacher. If you find yourself giving in to FOMO and buying meme stocks/cryptos, and then if you come to regret it if you lose money, then maybe you got your money’s worth with the lesson learned. The antidote is to keep learning and try not to repeat the mistakes again.
If you’re not bringing in as much as you’d like to or need to, then find more ways to make more income. Hustle til you make it! The best way is in the form of a business as long as you’re able to generate positive cash flows and not over-leverage yourself and remain interested in what you’re doing.
Take your time in trying to figure out what kind of income streams you’d like to have for yourself. It’s better to get to know yourself than being in a rush to make a quick buck or making a commitment to run a business when you’re not ready to do that.
Debt kills bro. Pay off all your student and car loans, any credit card debt, and the only ones that maybe are OK to not pay off immediately might be a mortgage or business loan. I prioritized doing this so that I became debt-free in my 20s! Just being in the black makes me feel wealthy, it’s an amazing feeling!
If you start making more money, don’t let lifestyle creep cloud your priorities. Of course you could afford nicer things, but would you rather have things or be wealthy? Don’t lose sight of any debts that could be keeping you from being wealthy.
In essence, live below your means, even when you graduate from your 20s into your 30s.
Live life to the fullest and take risks within reason. It’s OK to feel like you’re broke or poor in your 20s because that’s what society expects of us when we’re in our 20s, but that doesn’t mean you can’t still enjoy life and become rich in experiences even if your bank account doesn’t have a lot of money.
Once upon a time, I didn’t have much money, but I still made the most of life by doing things like skydiving and bungy jumping in New Zealand. I wouldn’t trade those meaningful experiences for any amount of money in the world. And I could barely afford those experiences, but I offset some costs by staying in cheap youth hostels at the time.
Your 20s are the best time to try out different jobs to see what kind of career you’d like to have, whether you’re working for someone else, or yourself! The older you get the harder it can be to switch careers since people in their 30s tend to get a spouse, a house, kids, or other kind of commitments that weigh them down. The best time to act is now in your 20s while you’re not weighed down by baggage.
The best thing I’ve found is not to overthink these actions, but to gradually everyday make a conscious decision to improve a little bit. After a decade of honing your self-discipline skills, I think you can’t help but become wealthy by your 30s, if not by your 40s!
A lot of financial insecurity evaporates if you go about this correctly, and I believe if you consistently make good decisions, you’ll reach your financial goals! If you’re interested in learning how to take control of your finances and start becoming an investor like Warren Buffett, check out my free PDF guide.
I look forward to making more investor friends! Add me on instagram @michellemarki! 🙂