Most Millennials in their 20s have less than $1,000 in their saving accounts. According to GoBankingRates Survey, nearly half haven’t saved anything at all.
There is no right age to start investing. In fact, the earlier you start the better. People who start investing while they are still young develop spending and investing habits which last a lifetime.
So, if you are planning to make money in your 20s, you have come to the right place. In this guide, we will discuss the best ways to invest money in your 20s.
1. Make a Financial Plan
How much money would you like to have in your account at the age of 40? What is your target salary and when are you planning to retire?
The answers to these questions are your goals, and they will guide you through creating a good financial plan. Goals motivate and continuously remind you that you must do something to get where you want.
Entrepreneur Mark McCormack explains the same idea in his book “What They Don’t Teach You at Harvard Business School.”
According to the book’s concept, students with goals earned ten times more than the students who didn’t have clear goals.
2. Establish a Budget
You must figure out how you will slice your bacon after bringing it home. Without a budget, your financial goals and plans reduce to nothing. The budget helps you to maintain discipline by guiding you on how to spend.
When creating the budget, note down all your expenses. These include your bills, food, and utilities. It will be easy for you to cut cost when you know where your money goes.
Using your budget, reduce expenditure on the things that you spend much on. You can digitize your budget using a budgeting App or site.
3. Avoid Debts
Although it might be hard to avoid debts as a young adult, you can set a reasonable debt repayment plan. For student’s loans, set a good strategy to settle the loan.
You can also consider the programs which help to reduce the burden such as AmeriCorps or the Peace Corps. A much more reliable method is to trim the costs by setting an automatic payment for the loan.
Besides the student loan, plan on how you will tackle your credit cards. If you have outstanding loans, start by paying those with the highest interest rates. Once you settle them, aim to live a debt-free life.
4. Choose Your Friends Carefully
Have you been pressured by your friends to buy certain outfits? Do your friends invite you to expensive parties and nights outs?
A survey done by the American Press Institute shows that 78% of young people determine their own habits by following that of their friends.
Two-thirds of them try to keep up with their friend’s residential status. Others try to keep up with their friend’s wardrobe, while others keep up with the latest restaurants and gadgets.
So, if you have friends who are influencing you to spend more than what you can afford, say no. Keep a small circle made of like-minded friends. Create long term financial goals and start thinking about how you will invest.
5. Make Investing Automatic
You can set automatic deposits on your account if you want to go beyond the employer’s retirement plan. According to Retirementinvestments.com, it is better to plan your investment as you retire from work consistently, and not just in your 20s.
The automatic deposits can be weekly, quarterly, or even monthly depending on your financial status. That way, your investment will be like a bill that you have to pay regularly.
You don’t need to have substantial amounts for you to keep up with the investing. If you have a few dollars, micro investing would be an excellent option for you.
You can do it through the various online apps, which also reminds you to save when you forget.
6. Buy Shares or Stocks
The stock market is unpredictable. However, the investments offer good returns than all types of investments. Before you invest, consult a financial advisor to help you make the right decisions.
You should also research to find out more on the best companies to invest within your state. If you fear stocks, consider government or municipal bonds.
Although the returns of the bonds are lower than that of stocks, they are safer and thus best for the risk-averse investors. You can purchase bonds from your financial advisor or through your bank.
7. Quit a Job That Isn’t Helping You Achieve Your Goals
If you are not getting the salary you deserve, quit the job. Experts believe that staying in the same position for too long can reduce your lifetime earnings. Since most income increments depend on the current salary, you will have a tough time to get to where you want.
As shown by a Forbes article, working for the same company for more than 10 years can reduce your earnings by more than 50%.
While it’s not good to keep hopping from one employer to another, staying in the same position and job can harm your financial well being. Move to better prospects if you feel you are underpaid.
8. Ask for Help
You may need the help of a professional financial planner when your options for investments increase. Beyond the planning, a planner can help you with other financial issues such as debt management, retirement planning, insurance, tax, and much more.
Good investment planners also offer a wealth of experience and can, therefore, provide valuable insights based on moves or mistakes that others have made.
If you don’t want to work with a financial planner, a robot advisor can still be a good option for you.
Although the robot advisors don’t offer personalized services that you can get from the traditional ones, they can guide you on making investment decisions. Robot advisors are good for beginner investors.
Best Ways to Invest Money in Your 20s
As you can see in our list, there are many best ways to invest money in your 20s. So, start anywhere, even if it means starting a small business.
You will be surprised by how much you would have made a decade later if you maintain the same investment spirit.