Another day, another series. I love starting and finishing these mini-series because it gives me a sense of accomplishment. Today, we are beginning the Planning for Retirement Series. This series aims to help people to learn exactly what they need to focus on at a particular age bracket.
The world is a busy place, and everyone wants to catch your attention. And to be clear, they don’t want you to have a successful retirement; they want your cold hard money. They want you to buy new cars, big homes and go on expensive vacations.
The sooner you learn to push those things to the side and buy and hold assets, the sooner you will be rich—then you can afford new cars, big homes, and expensive vacations. Funny how that works, right?
Throughout this series, we will cover the timeframes of your 20s, 30s, 40s, 50s, 60s, and 70s. No matter your age, you will want to read all the articles. You may have missed something, or a new investment idea may arise. With no further ado, let’s jump into the roaring 20s.
The 20s are a time of carefree fun and little responsibility. I remember being 20 and thinking that 40 years were so old and over the hill. Then I turned 40 and felt 20-year-olds are clueless.
The hardest part about your 20s is thinking about the future, especially your retirement. It seems like you have so much time to accomplish everything you want. Let me tell you, my friend, time flies. If you can think about your retirement, you will be ahead of the power curve even a little bit.
On the employment front, you will want to contribute to your 401K and get employer matching. Then you will want to max out our Roth IRA. I am not a big fan of maxing out Roth IRAs, but I also have an excellent military pension. You may not have this established.
Now for the hard part, I need you to start reading. These two books, in particular, will help you along your way. “Rich Dad, Poor Dad” and “I Will Teach You To Be Rich” are two books I consider vital to any human. The idea is to stay debt-free and build the mindset of an investor.
One of your goals is to avoid student loan debt. In the article “Don’t Let School Interfere with Your Education,” I state that you learn how to get rich on your own through self-education. College will teach you how to become a high-paid employee. However, we need to know how to diversify our income away from jobs.
Our jobs give us little in the way of leverage. We have no control of our time or income, both things you can control by starting your own business. In “6 Types of Income Streams,” we learn that we can start our business in a category where we are most comfortable. The book “Creating Income Streams” goes deeper into the various income streams.
The power of compounding is something that everyone in their 20s should know and understand. Even investing a little money during this age of your life can lead to massive gains.
Here is a chart on if you missed the top 10 days in the stock market over 20 years. The chart shows that getting your money into the stock market is the best way to get out-sized returns. Here is the full article on the Motley Fool.
When it comes to real estate, it may be hard to start investing without the aid of parents. If that is the case, you can still leverage real estate by keeping your expenses low and investing the difference in dividend-paying stocks and cryptocurrencies. The articles “Leverage Real Estate at any Age” and “Mortgage Zero” describe ways to use your current living situation to minimize housing costs and maximize cash flow.
Speaking of investing, let’s talk about dividend-paying stocks. It will be tough for a young person not to invest in capital gains. All the talk around young people is about how much profit someone made by investing in whatever hot stock there is at the moment. If you can see past this and invest for income, you will be rich faster than your buddies.
My article “Capital Gains vs. Dividends” lays out the difference between the two. Understand that when you invest in capital gains, you will always be chasing the next big thing with no rest. Investing for dividends is very peaceful; you just wait for your dividends to drop into your account. The Stock Market 101 series is for people who are new to investing. Don’t worry; I cover capital gains investing a little. Try to keep it to less than 10% of your total portfolio.
Cryptocurrencies are a big thing in today’s world. They are highly volatile in their current state, so they are more suitable to people in their 20s, like yourself. There is not much I need to say about cryptocurrencies to a young person; I am sure you are already tracking everything. Here is my thesis on why I am investing in Bitcoin, specifically.
We want to start creating luck with our money. In the article “How to Create Luck with Money,” I describe how to seemingly always get lucky with cash. The formula for luck is: education + opportunity + action = luck. The sooner we start reading books on real estate, retirement planning, cryptocurrencies, business, and stock market investing, the better we position ourselves to become lucky.
You also want to find your spouse in your 20s. I know it is hard to find love on a schedule; however, it only gets more complicated as we age. We become more and more set in our ways as we grow older. In your 20s, you will have the least amount of baggage and scar tissue from past relationships. Ensure that your future partner and your views align in love and finance. The article “Strong Finances, Strong Marriage: 10 Steps to a Healthy, Wealth Marriage” should be read before you marry.
That about does it for the 20s. I want to write more because I know so much more. However, if you can get some of these basics down now, you will easily be rich in your 30s. The key takeaways are being a good person, starting your self-education, investing for income, and getting married. See you in your 30s.
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
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