If you’re a typical 20-something, you likely find the concept of building wealth to be very foreign. After all, you probably haven’t been working full-time for more than a decade or so. You may even have student debt and other obligations that seemingly make building wealth next to impossible.
I’d like to challenge that notion, though. In this article, I’ll show you how to build wealth in your 20s even if the odds seem stacked against you.
You’ll learn:
- how to capitalize on the tremendous advantages you have by virtue of being in your 20s
- what investments are worth considering if you’re currently in your 20s
- what investments you should stay away from
- how to humanize the concept of wealth and see yourself capable of achieving it
“Wait, why should I listen to you?”
Before we dive into my personal tips for building wealth in your 20s, let’s set the stage and discuss why you should even bother listening to me.
The answer is simple: I’ve built a respectable amount of wealth (well into the six-figure territory) in my 20s.
I’ve done this without rich parents, a large inheritance, or anything of that sort. I don’t even have a particularly impressive degree; I studied journalism and have worked in digital marketing jobs for my entire career thus far.
What I’ve done is the very same thing I’ll recommend to you: lean heavily into my advantages while minimizing the impact of my disadvantages.
What does that look like? Let’s dive in.
How to build wealth in your 20s
1. Stop looking for the perfect job – just get to work
Too many people spend years in their 20s refusing to take any career path or job seriously if it doesn’t feel perfect. This is a huge mistake.
The reality is that it takes a few years of actively working to learn what you want out of your career. During that time, fall in love with the process of trying new things, learning new skills, and establishing good financial habits rather than trying to change the world.
This has been a key part of building wealth in my 20s. No job I’ve held to date has filled me with excitement every single day. But I’ve shown up every day to build experience, grow my network, and collect a steady income that I use to invest.
Conversely, I’ve met people who are much pickier about the jobs they apply for and accept. Many are still spinning their wheels and not building much wealth. They’ll likely figure it out eventually. But this article is about building wealth in your 20s. If that’s your goal, you can’t afford to only start taking jobs seriously in your 30s or 40s. You need to hunker down right now and get to work.
2. Start investing ASAP (even if it doesn’t seem like much)
Another mistake many people make in their 20s is refusing to invest until they feel like they’re earning “enough” and/or working in a “serious” role.
I made this mistake in my early 20s. I was earning decent money as a freelance writer while in college. However, the work felt so informal and far removed from my career objectives that I didn’t view it as a “real” income stream until roughly a year in. By that point, I’d already squandered thousands of dollars.
Thankfully, I wised up and started consistently investing money from every paycheck. Check out this article for some tips on doing that. You should also read this article if you feel like you’re not earning enough to warrant investing. In it, I discuss 18 ways you can invest with little money.
If you’re confused about the concept of investing altogether, check out this detailed explainer I wrote up.
Lastly, if you’re wondering why investing in your 20s is so important, read this article. In it, I explain why every dollar you invest in your 20s will be worth more than even $2 invested later on.
3. Realize investing is just one of many ways to build wealth
While investing is incredibly powerful, it’s not the only way to build wealth. This is particularly true when you’re just starting to lay a financial foundation in your 20s. There are other important objectives to fit in as well, such as:
- paying off debt
- building an emergency fund
- saving up for a house down payment
In the second point of this article, I share a widely accepted framework for setting sensible financial priorities. While they’re not all as exciting as investing (especially at a time when meme stocks and dog-themed cryptocurrencies are skyrocketing in value), each priority is crucial for building wealth sustainably.
4. Focus on the long game
Building wealth doesn’t happen overnight. It takes years of consistent (and often boring) action.
Complicating matters is the fact that along the way, you’ll likely meet many apparent overnight success stories. In reality, true overnight success stories are rare. You’ll have a much higher likelihood of success if you focus on the long game, which means:
- investing in good assets consistently rather than chasing hot stocks
- learning new skills rather than expecting your current knowledge (which, chances are, doesn’t amount to much if you’re in your 20s) to make you rich
- not chasing after every shiny new business idea that catches your attention
In fact, the irony of playing the “long” game is that you’ll almost certainly become wealthy sooner than 99% of the people who chase quick riches. You’ll also be a lot happier.
5. Be cautious about buying status symbols
Status symbols (i.e. fancy watches and cars) are pretty fun to own. However, they can also absolutely torpedo your ability to generate wealth. This is especially true in your 20s when spending a few thousand dollars on a status symbol can cause you to have tens of thousands of dollars less in retirement.
I’m not saying you shouldn’t own nice things, though. In fact, if you can build significant wealth and purchase things that excite you at the same time, do it! However, most people can’t pull that off in their 20s.
The good news is that if you play your cards right in your 20s, you’ll have no problem buying status symbols later in life (if those things are still a priority to you at that point).
My point? Don’t put the cart before the horse. Don’t end up looking like you’re worth more than you actually are.
6. Lean into your advantages
Getting ahead financially these days can be challenging. Those of us in our 20s have already seen our world impacted by two major recessions. House valuations are astronomical, as are the costs of healthcare and education.
In light of these challenges, there’s no shame in taking all the help you can get – especially if you’re looking to build wealth in your 20s.
My greatest advantage right now is that I have a solid relationship with my parents who don’t mind that I still live with them at 25. This lets me invest 40% of my income, which has been an absolutely fundamental part of building wealth.
Do people tease me occasionally? Yes. Do I care? No.
The fact is, if you’re looking to build wealth in your 20s, you’d be crazy not to capitalize on any advantages you have.
Your advantages might look different than mine. You might have parents willing to give you money for a down payment on a house, get you a good job through their network, etc. Whatever the case may be, don’t fall into the all-too-common trap of assuming only “self-made” wealth matters. Because spoiler: Self-made wealth doesn’t exist. Everybody gets help along the way.
7. Don’t stay at a single company for too long unless they’re offering competitive raises
Building wealth is much easier when you’ve maximized your earning potential. Research shows the best way to achieve this is by changing companies roughly every two years.
This can be nerve-wracking when you’re in your 20s and don’t have a lot of work experience. You might think changing jobs that often would be detrimental to your career. That’s not necessarily true. In fact, as this article from The Balance points out, staying too long in one role can signal to prospective future employers that you lack ambition.
In my opinion, the key when you’re in your 20s is to stick around long enough to make an impact and develop new skills. Once your job no longer feels like a challenge, start shopping your resume around. If you receive an offer for a job that pays more and will keep you progressing career-wise, consider taking it.
8. Set SMART financial goals
In the context of goal-setting, SMART stands for:
- Specific
- Measurable
- Achievable
- Realistic
- Timely
If you set out to build wealth in your 20s yet haven’t set SMART goals, you’ll never be satisfied. You may even have a hard time staying motivated.
Consider, for example, a generic goal such as “becoming a millionaire.” It leaves many questions, including:
- Why do you want to become a millionaire? What if you had more or less than that amount? Could you still be wealthy?
- What amount of money are you actually hoping to obtain? Exactly $1 million? Or several million?
- When are you hoping to become a millionaire? How will inflation affect the significance of that amount by the time you obtain it?
A much better approach would involve following these steps:
- Figuring out how much money you actually need (I wrote this article to help you with that)
- Setting a plan for obtaining that amount (i.e. saving x dollars every time you get paid) within a reasonable timeframe
- Deciding where to keep the money (i.e. in a savings or investment account)
- Periodically adjusting your plans as needed
Keep in mind: Building wealth is a life-long process
Building wealth in your 20s is challenging but it’s by no means impossible – especially when you set reasonable expectations.
Above all, keep in mind that building wealth is a process. You probably won’t get 100% of the way there in your 20s. You can still make significant progress and consequently enjoy your 30s and 40s from a much more relaxed position than you would otherwise be able to.
If you enjoyed this article about how to build wealth in your 20s, you might like my other financial planning posts. Check them out here.
