You can’t get ahead. The system isn’t set up for millennials to win. There’s no way to escape debt and enjoy financial freedom.
These are the lies that people tell and, unfortunately, far too many believe them.
And while it’s definitely challenging to become financially successful in today’s world of high student loan debts and low entry wages, it’s far from impossible. Many are even finding a way to do it while still in their 20s.
Stop Being Like Everyone Else
If you look at the statistics, you’ll come away with the notion that people in their 20s can’t be financially successful. Consider that:
- 20 percent of Americans don’t save any of their annual income.
- Only 60 percent of Americans have more than $10,000 set aside when they retire.
- 56 percent of millennials have zero dollars saved for retirement.
- Two-thirds of Americans have trouble scraping together $1,000 for an emergency.
- Only 24 percent of millennials can pass a basic financial literacy quiz.
While these statistics are eye-popping and slightly depressing, they don’t have to be your story. For every statistic, there are people on the opposite side. That can be you. And you don’t have to wait until you’re 40 or 50 to get your financial act together.
6 Ways You Can Build Wealth Before the Age of 30
Contrary to popular belief, young people can build significant wealth. It all starts with some simple foundational principles and smart decision-making. Here are some suggestions:
- Increase Your Income
This may seem overly simple, but the best possible thing you can do is increase your income. Don’t wish you were making more money, but actually go out there and proactively grow your income. This might look like working more hours, asking for a raise, adding a side hustle, or starting your own business.
- Get Control of Your Spending
Once you feel good about the amount of money you have coming in, you need to get control over how much of that money you’re spending (and what you’re spending it on).
You don’t have to live on rice and beans for your whole life, but you should strip away superfluous expenses and be diplomatic about how you spend, save, and invest. Being able to set aside 50 percent of your income to go towards cash savings, paying down debt, and investing is a good rule of thumb. If you aren’t there yet, you need to increase your income and/or be smarter with your spending.
- Invest in Retirement
There’s no better time than the present to invest in your retirement. While 60 or 65 might seem like an eternity away, your early investments will yield massive dividends in the decades to come. Just check out this article to understand how significant investments can be when made in your 20s.
- Buy a House and Build Equity
Home ownership needs to become a goal of yours. While it comes with additional expenses and responsibilities, home ownership also gives you an opportunity to build some serious equity.
The beauty of home ownership is that you can build equity through two different methods: (1) paying down debt, and (2) watching as your property value increases. When both of these are working, your net worth can increase dramatically over the course of just a few years.
- Say No to (Bad) Debt
Nothing will set your personal financial picture back quite like bad debt in your 20s. Whether it’s piles of student loans, credit card debt, or a car loan, these payments eat away at your income and limit your flexibility when it comes to saving and investing. Stay away from bad debt at all costs. Home ownership, real estate investment loans, and smart small business loans are really the only kinds of debt you should consider at this point in your life.
- Live Well Below Your Means
This isn’t a sexy tip, but it’s a necessary one for you to hear. Living below your means is simple, yet difficult to follow. It means buying less of something than you can afford – less house, less car, fewer extravagant vacations, etc. In doing so, you cultivate self-discipline and bolster your cash savings and investments.
Adding it All Up
Don’t wait until your 30s, 40s, or 50s to get your finances in order. When you’re in your 20s, time is on your side. Save, invest, and spend wisely. Wealth will eventually follow.