The Personal Finance Podcast - The Fastest Ways to Grow Wealth In Your 20’s (and 30’s!)

Episode Date: November 4, 2020

Episode 26: The Fastest Ways to Grow Wealth In Your 20’s (and 30’s!) In this episode we cover:  Why your 20's are the financial golden years  How to increase your income How to Save More Money  How to set your life up for wealth  RESOURCES: M1 Finance Best Place to Invest  Personal Capital Free Wealth Management and Budget App  CIT BANK (Best Savings Account) ** Some links may be an affiliate link and we earn a small commission at no extra cost to you. We only recommend products we truly believe in.  Learn more about your ad choices. Visit megaphone.fm/adchoices

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Find your advisor at IG Private Wealth.com. On this episode of the Personal Finance Podcast, we're going to talk about the fastest ways to grow wealth in your 20s and 30s. What's up, everybody? And welcome to the personal finance podcast. I'm your host, Andrew, founder of dollar after dollar.com. And today on the podcast, we're going to be talking about the fastest ways to grow your wealth in your 20s and your 30s.

And the reason why we're going through these ways to grow your wealth is because if you're not where you want to be and you're in your 20s or your 30s or you want to set a financial baseline for yourself. If you want to set yourself up for financially for the rest of your life, then if you follow these eight different ways to grow your wealth, you're going to be massively better off than somebody else who does not know a few of these things. And even if you just take a few of these takeaways and start applying them and implementing them, you're going to be significantly better off than anyone else who doesn't do any of these at all. And the reason why I wanted to make this episode is I have so many people emailing me and ask me, what can I do?

I'm young. I'm in my 20s. What can I do to set myself up to build wealth? So these are the eight best ways. These eight ways are going to get the ball rolling to get you started to increase your income, reduce your expenses, and allow you to grow and invest that gap. Because that's what you want to do is invest a gap between your income and your expenses to allow yourself to build a massive portfolio of wealth. And there's a number of ways to build wealth. There's a number of ways to do this. But these eight ways are going to give you a baseline because if you build a strong baseline in your 20s, you're going to set yourself up for the rest of your life. And that's what a lot of people don't understand. When you're in your 20s, it's go time. And what I mean by that is that you can build

significantly more wealth than somebody else who starts in their late 30s or 40s or 50s. Your 20s allow you to build wealth and have an easier path to building wealth. And having an easier path to building wealth allows you once you hit your 30s or your late 30s or 40s to kind of just cruise control along because you already have a system in place and it's running on autopilot. And so setting yourself up early is massive for a number of reasons, for compound interest, for building positive habits, and for allowing you to accomplish your goals and do exactly what you want to do in life. So let's get into the fastest ways to grow your wealth in your 20s and 30s. So the first one is to invest in your education. And this is one of the first things I did when I left

college because when I was in college, it was all about my schoolwork. But once I left, I realized there's so much more to learning than just being in school. And once you can develop and pursue the things you want to learn about, it's going to massively, massively catapult your growth, especially in personal finance, but in every area of your life. And this is such a huge way to build wealth, because if you have some knowledge, you don't have to have a ton of knowledge, you don't have to have the knowledge of a financial advisor or a financial analyst or a banker or anything like that, you just have to have some knowledge and enough knowledge to know when an opportunity comes up, you need to take advantage of it. And having that as a baseline in your 20s,

your 20s are for learning and growth and getting yourself started. And if you have that knowledge in your 20s, that knowledge is going to carry you throughout your entire life. And this is one of the biggest things I did when I graduated college is I committed to investing in my education. And how did I do that? Well, the first thing I did was I said, I'm going to read a book a week. And that may sound like a lot to some people. It might sound like a little to some people. And I still do it to this date. I still read a book a week. And that could be through physical books, which is my preferred way, but it can also be through audio books or other ways that you can read through digital copies or things like that. But I said, I'm going to read a book every single week. And it's a very simple process of the

way that I read a book every single week. And we're going to have a future episode on how I do that. So make sure you're subscribed to do it. But this is a huge way to allow yourself to expand your knowledge. And another way is podcast, just like we you're doing here because there's a plethora how do you like that word there's a plethora a podcast out there that will increase your knowledge and allow you to be able to have a better understanding of various topics that you want to learn about and you don't have to just be reading about personal finance you can be reading about business if you're interested in business or increasing skills or doing things that's going to increase your income tom corley the author of rich habits actually

has a couple of chapters and it shows that most millionaires invest at least 30 minutes a day into reading. Now 30 minutes a day will allow you to read about a book per week. And that knowledge compounds because what happens is when you have that knowledge and you're reading a book per week, it's going to change the way you think and it's going to change the way you think about the world. It's going to change the way you think about business. It's going to change the way you think about money and it's going to truly catapult your growth. And if you do that in your 20s, you're going to be miles ahead of most people. If you don't believe me, just try it. Try it for one year. Commit for one year to reading a book per week and watch what happens to your money. Things just start to happen because

is you have the knowledge to take advantage of opportunities, and you know where to look and to find things that will literally increase your income. And if you want to get started in reading a book per week, we're running a contest right now. All you have to do is leave a rating and review on iTunes. Send me a screenshot to Andrew at dollar after dollar.com. And I'm giving away two of my favorite books of all time of personal finance. That's Rich Dad, Poor Dad, and the Millionaire Next Door. That's all you have to do to enter. And the winner's going to get both copies of those books. And we're going to actually pick a couple of winners to do that. So that's one way to get yourself started. You have two books already that you can win to start off investing in your education. Now, the second one is to

invest a chunk of income every single month. Now, I've talked about this a number of times, but if you remember the episodes where I'm talking about retirement, the best way to invest a chunk of income and find out how much you should be investing is figure out how long you want to work until you want to retire. Say you want to retire in 15 years. We just have to work backwards. How much do I have to invest to be able to retire in 15 years and how much do I need to live off to be able to retire in 15 years. And that's how you figure out how much you need to invest. But investing a chunk of income allows you to truly start building wealth. Because if you're just saving your money, your money is not doing anything for you. You have to invest that money. It has to go into investments

because that's how compound interest works for you. Because in the long run, when you're investing your money, compound interest is going to be the majority of your income. The majority of your portfolio is actually going to be compound interest. It's not going to be the money that you put in. It's not going to be your principal. Compound interest is going to do the work for you. You can have a free employee just by investing your income. And that's how you have to think about investments. Your money can work for you or can work against you, but it's either or if it's sitting in a bank account, it's not doing anything for you. If it's sitting in a high yield savings account like some people like to talk about, it's not doing anything for you. So investing your money and getting started investing while you're

in your 20s is going to reap massive benefits for you because compound interest for someone in their 20s, someone who starts in their 20s is going to have to invest significantly less every single month than a person who starts later in their 30s because compound interest is working significantly for them. What I mean significantly, I mean hundreds to thousands of dollars less per month. So definitely get started investing as soon as possible. So lately, I've been noticing how fast things are changing at home. The kids are growing like crazy, clothes don't fit anymore and routines are changing. And it just hits you. Life is expensive. And when your life grows, your responsibility grows with it.

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A lot of 20-year-olds like to ball out and they like to look cool with their friends and things like that. So the first thing they do when they leave college is they buy the nicest car they can. And this is a massive mistake for most people. Now, if cars bring you value, that's fine, but understand that a car is a depreciating asset, which means it goes down in value over time. So the second you drive your car off the lot, it's losing $8,000. right away, especially if it's a new car. So driving a cheaper car for longer periods of time

is going to allow you to significantly build more wealth. And what I mean by significantly, I mean over the course of time, you're going to have well above six figures, additional net worth because you drove a cheaper car. So if keeping up with a Joneses is important to you or looking cool with your friends is important to you, that's fine. But just know that you can stay broke if you continue to do that if you're not making enough income. Now, if you want to drive a nice car and you're not making a lot of money, then increase your income. Or my favorite way to do it is to go buy an asset, go buy a rental property or something like that with $20,000 down, let that rental property produce $2,000 to $300 a month, and pay for your car payment. Pay for your fancy car payment. Because guess what?

Once you're done with the car, you still have that asset. You still have the house, and the house is still producing income. And so that house can produce income forever. And that's my favorite way to buy depreciating assets. Because if you do it any other way, you're just buying something that's going to make your money go down over time. Number four, learn high income skills to increase your income. Now, the personal finance podcast is all about increasing your income, especially in your 20s. And what you're going to learn is a lot of people leave college and they're not making as much money as they want to in their 20s. So guess what you have to do? You're going to have to increase your income. And there's a couple of ways that you can do this. And we've talked about a number of these ways

before, one of which is to ask for a raise at your current job. So the first way to increase your income is to look at your current job and figure out how to ask for a raise. And we have two episodes on how to ask for a raise early on. So listen to those episodes because I deep dive into my exact system on how to do that. But beyond that, what you want to do is learn high income skills because that's one of the best ways to ask for a raise A, but increase your income, B, because high income skills are everywhere now. And they're easily attainable in some situations. So So the first thing you want to do is look at your current job and say, what are people above me? How did they get to that level?

Do they have any additional skills that I don't have? And if they do, go get those skills. Go figure out how to learn those skills. So say, for example, someone above you is really good at Excel. Well, go take a bunch of online courses about Excel, learn exactly how they do their specialized reports or whatever they do within your current job and then do it better than them. And what you're going to find out is as you add these skills, your income is going to increase. or if you don't know what you want to do in your life and you're in your 20s and you have no idea what you want to do, look for high income skills because that's going to allow you to propel you forward. And there's all kinds of skills that you can learn. But the first place to look is at your current job. So for example, let's say you're a nurse and you're not making as much money as you want to. You want to increase your income because you want to retire earlier. One of your options is that you can go back to school and become a practitioner and increase your income 30, 40, 50 percent because a nurse practitioner makes significantly more income.

than a registered nurse. So looking at your current job is the first thing you want to do. But then adding additional skills, maybe you can use these for side hustles or other things will allow you to propel your income outside of your job as well.

So things like SEO, search engine optimization, or digital marketing, or coding, or sales. Sales is one of the biggest ones because anybody that's good at sales is going to make money. So understanding sales

is a massive, massive impact on your financial bottom line. You can learn things like Excel or trade skills, business analysis, audio and video production, all these things. There's so many skills that you can add. Learning as many of these high income skills as possible

is going to allow you to propel your income to new heights. So the fifth one is to live in a cheaper home. Now, housing is the biggest expense for most people. And what I see happen is a lot of people will graduate from college and they go get the fancy apartment downtown with the awesome view and they're putting all their money towards their rent. And this is how a lot of people get into debt because they're putting all their money towards their rent

and they're in student loan debt a lot of times, and they have no money left over. So they start swiping the credit card because they want to go to dinner with their friends. And then they swipe the credit card again because they want to go shopping. And this starts to build up. And this is what happens to a lot of people in debt.

And a lot of people who reach out asking for help with debt, this is their actual path. Because I see too many people who I know are not making a lot of money buying apartments, condos, houses that are way more than they need. But living in a cheaper home in your 20s allows you to save more money.

And saving more money catapults into investing that money. And that money can compound for you for the rest of your life. So making these sacrifices early on while you're young is going to make a massive difference in the long run. Then once you have enough money and you're making a significant income, ball out. Buy yourself an awesome crib. You could be on MTV cribs for all I care. But living in a cheaper home up front early on

is going to make a massive impact towards your bottom line. So what I recommend is looking for the best places that you can find in the cheapest neighborhoods. And a lot of times what you can do is if you're going to buy a house, you can buy a house that needs some renovation because you can add value to that house, or you can buy a duplex or a triplex and live in one side and rent out the other ones and live for free. There's a lot of hacks that you can do with your living, especially when you're young in your 20s, when you don't have a family yet or things like that.

So look at these options because it's going to make a significant impact towards your bottom line. Number six, and this is just a cool little money hack, but use the seven-day rule for expenses. Now, if you don't know what the seven-day rule is, it's basically just a mind game. It's giving yourself a cooling off period before making big purchases. And a lot of times a seven-day rule works for bigger purchases, but you can use it for any type of purchase, especially if you're an impulse spender. This is going to make a massive difference for you. Impulse spenders are everywhere, and the seven-day rule is going to fix that for you if you can implement it.

What it is is you just give yourself a cooling off period. before you make a purchase. And how long is that cooling off period? Well, the name says it in itself. It's seven days. So let's say, for example, you want to buy a brand spanking new air fryer. I don't know. And you see it and it's on sale and you're just going to buy it. Well, if you allow yourself that seven day rule and then you realize, you know, a couple days on the line, well, I really don't want that air fire. It's going to change the way you make spending decisions. Because if you still want it after seven days, cool, go buy it. But if you don't want it after those seven days, and obviously don't buy it. But this is just going to help you stop making purchases that you don't need, especially if you make a lot of impulse purchases.

And it's going to show you what you truly value. Because if you truly value something, after about seven days, you're still going to want that item. But if you don't truly value something, then along those seven days, some day down the line, maybe five, six, seven days on the line, you're going to realize I don't really want this thing. And so using that seven day rule is a great habit to get into that will save you a lot of money in the long run. Because even if this seven-day rule saves you $100 a month, say it saves you $100 a month from impulse purchases, that's over six figures of net worth when you retire. Six figures. So use this seven-day rule as just a little financial hack, a little mental game to play with yourself to change the way that you spend your money. Number seven is to start and or grow

your own business. Now, a lot of people in their 20s, we're going to call this a side hustle. And what that is is that you got your full-time job, but you're also starting a small business on the side to see if you can get it off the ground. And I think everybody should be growing something on the side all the time. You don't know how many small businesses I've tried and failed at. But continuing to try allows you to create something that's going to work. And if you stay in the game long enough, then it's going to end up working and you're going to figure out how to make it work. And there's a number of different awesome side hustles. Some that have really low startup costs, things like starting a blog or a website or affiliate marketing. And there's some with higher

startup costs that have brick and mortar offices and things like that. But in your 20s, you don't have a lot of money. So what you want to do is find side hustles that don't cost a lot of money to start up. And what I'm noticing now is there's a lot of opportunity for side hustles, what people call like sweaty startups, which are side hustles that are service businesses because a lot of people who are younger don't want to start service businesses because they're not easy to start. They're hard. But you can make a lot of money starting service businesses on the side. So really look to grow or start a business in something that you're passionate about so that you can pursue exactly what you want to do and it's almost like a hobby for you. But pursuing that hobby is going to allow you

to grow something around your interest and maybe create a business. And if the business grows large enough, then it could completely replace your income and you could be doing that full time. And you would completely regret not doing that if you didn't start it early on. Because one income stream is never a good idea, in my opinion. Having only one income stream does not allow you to diversify against things that could impact your finances in the long run, saying a job loss. In 2020, we had the pandemic, and the pandemic caused a lot of people to lose their job. Well, if you had an additional income stream, it can help you get through those stages and get to the next level to find another job, or you'll have enough time to grow that income stream enough to be able to make it your full-time

job. So never have only one income stream. That's why I always talk about having a side hustle, because in addition to growing that income stream, it's also going to allow you to invest more money, which can allow you to retire earlier, which allows you to create freedom for yourself. Increasing your income through adding skills and having a side hustle is going to be a massive, massive catapult to your wealth. And then number eight, the last one is to focus on your goals. Now, there's a very specific way that I set goals and we're going to get into that in a future episode as we get closer to the new year. But focusing on your goals is extremely important. And what you have to do is you have to set a plan and be able to pursue those goals because

if you don't have a plan in place, how can you ever think you're going to, accomplish anything. And so once you set up that plan, you're going to systematize that plan to create benchmarks because goals are for suckers, systems are for winners. So setting up benchmarks every 90 days to be able to achieve that goal is going to be massive. And then once you have those 90 day benchmarks, you're going to find out what you have to do every single day to hit that benchmark, and then you're going to execute daily. So what you're going to do is figure out what do I have to do each and every day because your 90 day benchmark is going to allow you to achieve your goal in the same amount of time that you want to do so. So figuring out what you want to do

each and every day. Let's say you want to invest in rental properties. You want to buy one house a year. Well, your daily goal could be, hey, I want to analyze five properties a day on the MLS or on Zillow until I find a property that's going to work. So you figured out you're going to analyze 35 properties a week. Now, 35 properties a week is going to allow you to find one every single year that you can purchase, and then all of a sudden now you're buying a rental property. But finding those small goals to break down that you can execute every single day is going to be a massive, massive difference for you and your wealth. And before we wrap this episode up, just understand this. Your 20s are your golden years for investing.

And what I mean by that is investing in your 20s will allow you to catapult compound interest into your favor. The earlier you invest in your timeline is going to tremendously increase the amount of wealth you have, when you retire, especially if you have a long time horizon. So your 20s and 30s are the point you have to get started. You have to start investing early because waiting too long is going to crush your progress. And if you're in your 20s right now and you're listening to this and saying, I don't know how to start investing. We have a number of episodes that we've talked about investing. We have a number of them coming up. So make sure you subscribe and we're going to go through this with you because a lot of times what people do is they don't know how to do something and they just

don't do it. And that's tremendously going to impact your retirement and your wealth in the long run. And your future self will thank you by starting right now. This is how you make the change in your wealth. This is how you make the change in your family's wealth for their future. This is how you make a difference forever. So what you want to do is start learning and investing in your education and trying to figure out exactly how you want to invest your money. Because investing now is going to change your future. And I don't mean it's going to change your future by just a few thousand dollars. I mean it's going to be hundreds of thousands of dollars, if not millions of dollars, depending on when you start. There's a big differential from someone starting when they're 25 and 35. It's well over a million

dollars just investing $400 a month. And that is why it's so important to get started as early as possible because it's at a million dollar impact on your finances. So starting now, starting to build wealth now, increasing your income, building skills, understanding when opportunities arise, growing a small business, doing all of these things is going to set yourself up. and build the habits to a massive, massive difference in the long run. Listen, I hope you guys got some awesome takeaways. Again, leave a rating and review, subscribe to the podcast. And if you have any questions, reach out to me at Andrew at dollar after dollar.com.

Thank you guys so much for listening. And if this is your first time listening, consider subscribing so you never miss an episode. And hey, if you get value out of this show, consider sharing it with a friend because we believe that every person in this world can build true wealth and build financial freedom, we want to share that message with everyone else because it starts right here. It starts with financial education. And it's not taught in high schools. It's not taught in colleges. So we want everyone to understand exactly how they too can build wealth and how they can go about building an amazing financial future. Again, thank you so much for listening and I hope you guys have a great day.