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