Before I jump into this topic, I want to start by saying I am not a finance expert by any means. I am an avid learner, and I love learning about money and wealth, especially when it comes to being wealthy in your 20s.
I have read many books, blog articles, and have spoken with many specialists about my finances to figure out what the heck I should be doing with them in my journey to financial freedom. Today I want to share 21 of my favorite tips I've picked up while learning how to become wealthy in your 20s.
1. Understand What True Wealth Means
Before you can be wealthy in your 20s, it is essential to comprehend the real definition of wealth. Robert Kiyosaki, the author of Rich Dad Poor Dad, says:
“The definition of wealth is the number of days you can survive without physically working (or anyone in your household physically working) and still maintain your standard of living.“
Do the math to see how much money you spend in a month compared to how much money you have saved in your bank account. Don't forget to include investing money you may have in stocks or a retirement account. If you are currently earning any money passively without having to work, add this too! That is how much wealth you have.
2. Make Your Finances a Regular Priority
Once you understand what wealth is, next you have to make your finances a priority. Make a point to think about your finances daily. Set up a time every week to evaluate your spending and take time every month to review your budget.
Making your finances a priority means setting time aside to monitor and analyze your spending regularly. As in any goal, to become wealthy in your 20s, it must be on your priority list.
3. Make Sure You Are Saving for the Long-Term
Saving money should be a part of everyone's financial plan. You should be saving every month, and not just in one savings account. One should be set up for each of your long-term goals.
These goals could be buying a house or a future investment. It's good to save for the bigger expenses you plan on having in the future. Or just to have money for future you. Building your wealth for the long term plays a significant role in being prosperous.
4. Make sure you are saving for the short term
You should also be saving for more short-term goals and emergencies, including replacing something in your home, buying a car, or even making a smaller investment. It is good to make sure you are saving between 10-20% of your total income each month.
Trim will help you save money instantly. All you need to do is sign up for a free, safe account. It will analyze your spending and find ways to save you money, and you don't even have to lift a finger.
5. Spend Your Money on Things You Actually Value
What do you value most when it comes to spending?
Do you enjoy a night out on the town or name brand food? Do you have to have the latest gadget, or would you rather make sure you are getting your nails and feet done? Want to travel or buy a boat?
Ask yourself these things, write them out, and stick to them. If you wish to take a trip to Belize next year, think about all the ways you can save more to get there. Buy generic food at the grocery store, skip on going out to eat a few times a week, bring your lunch to work, etc. Once you decide on what you value, make a point to cut out the things you do not care for as much.
6. Spend Less Than You Earn
Set your budget so that you are only spending a portion of what you make. That way, you can save 10-20% of your income I mentioned above. A good thing about doing this is that once you get used to living below your means when you do make more money, like getting a new high-paying job, you can continue the trend to spend below your means and save more money quickly.
This is probably one of the most important lessons when it comes to growing your wealth. How much you make does not matter as much as long as you are living below your means.
7. Start a Side Hustle
Saving is important, but you have to know how to make some money too. I have talked all about the benefits of side hustles before, but I want to say that no one gets rich from just saving. Having a side hustle allows you to create something on your own and make it bigger or keep it as small as you'd like.
If you can turn it into something that can automatically make you some money every month without having to work every time, that is even better. (Hello passive income, anyone?) And having a side hustle that brings in money passively for you is a great way to increase your overall earning potential. I have a list of 17 different side-hustles you could start to replace your full-time income!
8. Pay Your Bills on Time
Paying your bills on time is crucial if you want to keep your credit score in check. Get into the habit of paying your bills on time and avoid not only the headache of debt collectors but save you tons in late fees. Following this is mandatory, not optional.
9. Invest in Real Estate
I know everyone has their way to make income, but real estate is for everyone. Even Oprah invests in real estate in her spare time. There are just so many benefits of real estate investing, including the potential for passive income and being able to pay other people to do lots of hard stuff for you.
If you do not know anything about real estate investing, I suggest you read Rich Woman: A Book on Investing for Women, Take Charge Of Your Money, Take Charge Of Your Life by Kim Kiyosaki. She is married to Robert Kiyosaki, and she speaks from a woman's perspective on why this is so important, especially for women.
10. Start a retirement account
If your job offers a 401k or another retirement account, you should take advantage of it ASAP. If your company matches your investment in a 401k, it is imperative to join. It's free money, why not participate? You should still do some research on how it works and be sure to monitor it once you invest.
11. Set a budget
My favorite book on budgeting is The Debt-Free Spending Plan by Joanneh Nagler. She sets up an easy step by step process on balancing your budget so you can get out of debt. But it's useful information for even someone who has little to no debt in my belief.
If the idea of creating a budget makes you nauseous, one cool tool I LOVE to use is called Invibed Wealth Coaching. They make it very easy to monitor your spending and puts your expenses in sections based on how much you should be spending per category. The app is free, but you also have the option of working with a financial planner on a paid version if you choose. You can sign up for Invibed here!
12. Pay More on Your Debt Than the Minimum
There's no way you can consider yourself to be wealthy in your 20s if you have a mountain of debt. If you do have debt, pay more than the minimum to get ahead. I currently make sure to pay more on my long-term debts, such as my mortgage, car payment, credit cards, student loans, etc. Just by paying one more extra amount a year on my mortgage alone, I am cutting seven years off the time it takes to pay off. Pay more than the minimum, and your debt will shrink quickly.
13. Pay Down Your Credit Card Debt
If you are paying down debts, the one to pay off first is credit card debt. It costs you a lot in interest fees to have a revolving balance on your credit cards, so make a point to pay those first. Start with the cards with the highest interest rates by paying more than the minimum on those. Don't forget to pay the minimum on the others, though! Once you pay off the highest-interest rate ones, make your way to the next.
14. Choose a Career Where You Can Get Rich
There are many career choices out there, and if you plan on becoming wealthy in your 20s working for someone else, it is best to choose wisely. There are certain jobs out there where people are capable of being rich while working for someone else. A few of those include a CEO, Marketing Manager, IT Manager, and Pharmacist, to name a few. Check out this article on careers that can make you rich (especially if you are a woman) for more ideas!
15. Get Insured
You could get disability insurance as well as insurance if you were to pass. Make sure to get enough to cover your funeral costs and pay off your debts in this case. In some of these insurance policies, they work like money market accounts where you take money out of then if needed as well.
16. Track Your Spending
Joannaeh Nagler loves writing about “your little magic notebook” in The Debt-Free Spending Plan, and she talks about how you should document every single purchase you make in your notebook. Not only is meticulously tracking your spending important because you can see where your money is going, but it also makes you think before completing a purchase because you have to take your notebook out. If you find it too frivolous to record, you shouldn't buy it.
This is certainly one of the most valuable tips to become wealthy in your 20s. Track your spending, and it will open your eyes and hopefully change some bad habits. There are some great apps out there that do this for your automatically like Mint and The Invibed Wealth Coaching Tools. Check them out!
17. Find Ways to Cut your Costs at Home
I love cutting costs at home. I find myself unplugging unused appliances from walls, taking shorter showers, and even using less electricity during the day. Buy generic groceries, switch to the off-brand cleaning products, and even start making your chicken stock at home.
There are so many things you can do at home that can save you money that I am not going to delve even into any further. Just stay mindful of this one. Think: How can I save more money at home? We have a great article here on 20 ways to cut home expenses you should read.
18. Learn to Haggle
I suck at negotiating, despite all the books I've read about it. But there is one haggling tidbit I learned from The Five Lessons a Millionaire Taught Me for Women. In it, the author talks about learning the magic question, “Is that the best you can do?” when someone gives you a final price for something. I tried this out when I ordered a rental car and was amazed it worked.
The guy I spoke with gave me a price and told me about all the discounts he made on the rental for me. After his explanation, I politely asked, “Is that the best price you can do?” He told me to hold and came back five minutes later to say he cut off an additional $60 off my bill, and the price he gave me was now the best he could do. Those words were magic, and I highly encourage everyone to use them!
19. Ask for Decreases on Your Bills Regularly
This is a trick that my husband loves that I do every few months or so. I call one of our bill providers, such as our internet provider, and I ask if there are any ways to lower my bill. I have been doing this for years and have had much success with it.
The squeaky wheel gets the grease, so make a point call and directly ask for decreases on your bills. The worst they can do is say no. If this sounds like a big hassle, turn to Trim to help you out. Trim will track your monthly expenses for you and find ways for you to save money on your bills. And you don't have to make one phone call!
20. Cut Out the Unnecessary Expenses
If you are still buying expensive coffee a few times a week, eating out for lunch with your buddies every day, or impulse shopping, stop what you are doing right now and put that extra cash in your savings. Otherwise, you'll probably never be wealthy in your 20s. I have talked about three cool items you can buy once to save money over time in this article.
Successful people spend money on things they like. And you can too! Refer back to lesson number five if you need more guidance on this one.
21. Learn More About Ways to Save and Earn
Last but certainly not least, if you want to be wealthy in your 20s, you need to stay open to learning more about your finances. There is so much information out there that we have no excuse to be irresponsible with our finances.
The more you learn, the more you can increase your net worth! Keep learning, stay nimble, and get wealthy in your 20s. Good luck!
Books You Need to Buy
- Rich Dad Poor Dad
- Rich Woman: A Book on Investing for Women, Take Charge Of Your Money, Take Charge Of Your Life
- The Debt-Free Spending Plan
- The Five Lessons a Millionaire Taught Me for Women
- The Millionaire Next Door: The Surprising Secrets of America's Wealthy
Articles to Read
- 17 Side Hustles That Could Potentially Replace Your Job (And How to Get Started)
- 6 Simple Ways to Avoid Credit Card Debt
- Careers That Can Make You Rich (Especially If You Are a Woman)
- 20 Easy Ways to Cut Down Monthly Expenses
- 3 Items That Will Save You Money Over Time
- Financial Advice That Will Make You Rich
- Ten Money Mistakes to Avoid in Your 20s
- The Highest-Paying Jobs (That Will Make You Rich Like the Kardashian Family)
- 13 smart money moves to make in your 20s
- The Definition of Wealth