When you’re young, the future is full of possibilities. And if you want to set yourself up for financial success, your 20s can be a powerful decade to build the foundation of your wealth. With the ability to try new things, start investing, or build a business, you can use your 20s to catapult your net worth.
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We asked self-made millionaires for their best tips on how to financially make the most of your 20s to help others reach millionaire status. Here’s what they said.
When you’re in your 20s, you might just be starting your career. This means you’re on the bottom rung of your earnings potential, and maximizing every dollar you earn is more important than ever. When you create a budget, you’re creating a spending plan to make sure you don’t waste any money, and it allows you to save and invest more.
Gagan Saini, self-made millionaire and director of homebuying at Jithomebuyers.com, recommends getting on a budget as soon as possible. “The best way to make the most of your 20s and build wealth is to focus on developing a strong financial foundation,” said Saini. “This means creating a budget and sticking to it, paying off any debt you have, and investing in assets that will generate passive income. Additionally, it’s important to start saving early and often. Even small amounts of money saved regularly can add up over time.”
One of the most valuable investments you can make is in yourself. This might include reading books, taking online courses or attending conferences to develop valuable skills for your future. Investing in yourself while you’re young can pay major dividends in the future.
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Marshal Davis, millionaire and president of Ascendly Marketing, believes that owning a business is one of the best paths to wealth, but it requires that you invest in yourself. “While building a business, it’s important to understand that enjoying your 20s and accruing wealth aren’t mutually exclusive,” Davis said. “Rather than spending on depreciating liabilities like high-end cars or trendy gadgets, invest in experiences that can enrich your entrepreneurship journey — like networking events, industry conferences, or courses to hone your skills.”
Will Zhao, former Snap engineer who made his first million when the company went public and founder at Soft Gist, is a fan of skill development. “Spend time learning and developing high-demand skills,” said Zhao. “This could be coding, data analysis, or anything else that’s in demand in your chosen field. The more skilled you are, the more valuable you become to employers.”
Starting a business in your 20s gives you a lot of opportunities to make money. Since you’re young, you can try a few ventures, and if you fail, you can start over with minimal repercussions. A growing business can bring in income on the side, too, allowing you to make extra money while climbing the corporate ladder.
Davis believes that owning a business is the best path to wealth in your 20s. “The single best way to build wealth in your 20s is to launch your own business,” he said. “A well-structured business has the potential to offer exponential returns compared to a salaried job. An individual can start with a low-investment online venture, such as a drop-shipping business or freelance consulting, before scaling to larger endeavors.”
Bryan Clayton, self-made millionaire at age 31 and CEO of Green Pal, grew his net worth quickly by starting a business. “My lawn mowing business was my entry ticket,” said Clayton. “I consistently poured back into this venture, and based on the results, the returns were astonishing.
Investing in real estate has been one of the best ways to build wealth for hundreds of years. And today’s millionaires agree that real estate is one of the best investments you can make.
Davis is a big fan of real estate as a core investment. “Investing in real estate in your 20s should be a cornerstone for achieving a million-dollar net worth,” he said. “Real estate provides two key wealth-building advantages: steady cash flow from rental income and capital appreciation (not to mention tax advantages). Starting with a single rental property and scaling gradually can create a substantial wealth snowball effect. Using strategies such as house hacking, where you live in one unit of a multi-family property while renting out the others, can accelerate the process.”
Clayton also invested in real estate with profits from his business. “I redirected my earnings from mowing lawns into buying rental properties. Transitioning from a fleeting revenue stream to a more sustainable one was crucial.”
Investing in stocks while you’re young gives you more time for your investment to compound. And it can be a great way to build your net worth, even starting with a small amount.
Mike Hunsberger, founder of Next Mission Financial Planning and self-made millionaire at age 45, recommends investing as soon as possible. “The biggest thing is to get started as soon as possible,” said Hunsberger. “Time is your ally when you are young. You should also try to learn as much as possible about investing. While compounding your investment is important, when you are just starting out your savings rates and amounts will have a much greater impact than the earnings.”
Zhao likes index funds for passive investing when you’re young. “Start saving early and invest wisely,” said Zhao. “Consider investing in index funds and ETFs. They are a great way to get exposure to a wide range of stocks, and they often come with lower fees than actively managed funds. Plus, they can provide peace of mind and allow you to enjoy your 20s without worrying about your investments all the time. Since you’re young, you can afford to take on more risk, so having a higher proportion of stocks in your portfolio could yield higher returns.”
If you’re young and looking at college majors or career paths, pursuing a high-paying career can unlock a lot of financial opportunities down the road. And with the advent of online courses and education, you don’t necessarily need an expensive degree to qualify for these jobs.
Zhao made his first million as a software engineer, and recommends looking into high-paying careers while you’re young. “Consider fancy fields like technology and engineering, which are known for their high earning potential,” said Zhao. “You don’t necessarily need a fancy degree to get started. What’s more important is to know your stuff and gain experience.”
While investing early gives your money more time to compound, increasing your savings rate as you move up in your career can move you closer to financial freedom. Not only does it increase the amount of money you can invest, but you also need less to live on if you don’t inflate your lifestyle.
Hunsberger is a fan of investing your raises, too. “Start with what you can save and then every time you get a raise, invest 50% of the increase in your pay,” he said. “You haven’t learned to live on it so you won’t miss it. This will supercharge your savings over the long term. You’ll also be able to increase your lifestyle with the other 50% of the pay increase.”
While your 20s should be a decade of exploring and figuring out your career, it can also be a great time to build wealth. However, you need to be willing to try new things, such as starting a business or building skills.
These foundational activities can set you up for life in your 30s and beyond. And the experts agree: don’t waste your 20s — invest early and often. Just make sure to enjoy them as well, because you’ll never get that time back.
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This article originally appeared on GOBankingRates.com: Self-Made Millionaires: 7 Smart Ways To Make the Most of Your 20s Financially
