5 Financial Tips To Follow in Your 20’s

5 Financial Tips To Follow in Your 20's and For Millennials If you are in your teens or 20’s , this blog post is specifically for you. But I’d dare to say, you can probably take something away from this no matter your age. In general, it’s never too late to start your journey to financial freedom but the younger you are, the more of a head start you have on building wealth. If I could go back in time and give my 20-year-old self some financial advice, here’s what I would say:

1. Invest Now
Invest now , even if its $25 or $50 a month, the power of compounding interest is on your side. See the chart below for a visual demonstration on how investing earlier in life can exponentially increase your returns. You can invest by opening up an account at any investment management firm (I use Vanguard because their fees are the lowest in the industry). It’s pretty simple to open an account. If you are at a loss of where to start , check out this investment series by Jlcollinsnh, which helped me to figure out what I wanted to invest in. For me, it was index funds. Index funds are your best friend if you don’t want to spend the time to research and invest in single stocks.

chart-jp-morgan-retirement-1
(chart source)

2. Contribute As Much As You Can To Pre-Tax Retirement Accounts 

If you have access to a 401k through your job, invest the most you can in it now. When I first got my full-time job, I didn’t care about putting money away in an account that I couldn’t touch for 50 years. Little did I know , 401k and other pre-tax accounts like it are one of the most fail proof ways to build wealth over the long-term. Not only do you save money now on taxes by putting money away before the government gets to it , but your money grows exponentially by compounding year over year (as shown in the chart above).

There is also the myth that you can’t touch the money in your pre-tax accounts until your 65 or older. That is true in many cases, so I’m not advising you to use the funds for a house down payment (that would be a big no-no due to the high penalties). But, say you did want to retire early before the standard retirement age, there are ways to access your investments without penalty for living expenses using something called the Roth IRA conversion ladder. Even if you don’t access it earlier than the standard age, by contributing to it in your 20’s, you can rest assured that you will be set for retirement down the line. So, if your company matches your 401k contribution , at the very minimum, contribute up to the company match. And if you can, contribute even more. If you don’t have access to a 401K, you can fund IRA’s which would give you the same benefit of a 401K.

3. Take (Calculated) Risks

Now is the time to take as many calculated risks as you can. Assuming you don’t have a mortgage, children or spouse, this is the one time in your life where you have the right to be completely selfish. You should be exploring all of your interest to see what sticks. What is your passion? Can you find a way to make money from it? Start a business, work hard in developing your skills, stay  up late working on it. Go all in now and take SMART or as I like to call it, calculated risks.

4. Don’t Go Into Debt & Keep Your Expenses Low

Start paying off or make a plan to pay off your debt now. While in your 20’s make a promise to yourself that you will not accumulate debt. Don’t fall into the trap of buying things to make yourself feel better and impressing people with material things. The earlier you understand that debt and high expenses are what keeps most people working in jobs they hate, feeling trapped in lives they can’t stand, the better off you will be. Practice living a life of simplicity. You don’t need to live off of beans and rice but you also don’t need to go to the most expensive restaurants to have a good meal.

5. Have a Clear Vision For Your Future

Start thinking about what you really need in life to make you happy. How much money do you actually need to be comfortable? At one point, I thought I needed expensive things, and millions of dollars to be happy and live a good life. I know now that I really only need to cover my basic expenses and have enough money to splurge on a good dinner or vacation here and there. Knowing the type of life I want to live and how much money it will take me to live it, gives me a deeper sense of what I am working towards.

Overall, remember you have the power of time on your side they earlier you start savings, investing and practicing good money habits. As a bonus, check out the interview I did with Shaina, my awesome sister from The Mindful Rise, a lifestyle blog for college students, millennials, and young artists.

 

Love this blog post? Share it!

Share on facebook
Share on twitter
Share on pinterest
Share on linkedin
Share on email

6 thoughts on “5 Financial Tips To Follow in Your 20’s”

  1. These really got me thinking about my financial future. I’m going to be entering the working world full time next year and I’d love to be prepared once I start getting my own income on how to make the best financial decisions early on.

    1. You are at such a good place in your life to be realizing this so early. You will have a head start if you implement these things early. Good for you!

    1. Good for you for starting so young! Don’t be too hard on yourself though, we all wish we’d done things differently with the knowledge we have now but what matters the most is that you started on the path.

    1. Thank you! Glad you enjoyed it. Yes, just start researching and learn the basics. As you get more information it won’t seem as scary.

Leave a Reply

Your email address will not be published. Required fields are marked *

Hey! I'm Jamila!

I want to teach you what I’ve learned through a little trial and error and a lot of discipline over the years. My goal is to help you eliminate debt, save more money and increase your net worth.

Take the free quiz to discover where you are in your financial Journey.

free assessment

Unlock your future financial path.

Take the quiz to get a shockingly accurate description of where you are and where to go on your journey to Financial Independence.