You can accomplish all of this by laying out a strong financial foundation in your twenties.
Since you’re likely just starting out, developing good money habits now will be a lot easier than trying to change bad habits later.
Here are six income streams that you can set up in your twenties that will benefit you for years to come.
For Retirement (Passive)
You know the advice: the earlier you start investing the less money you’ll have to save. It’s true – compound interest will work in your favor. It's the premise behind the Ultimate Guide to Retirement.
When thinking about retirement, saving in your twenties is the way to go. You’ll not only have to stash away less money but you’ll also develop life-long money habits.
Here are three common ways to save for retirement.
Contribute to Your 401k
When you first start saving for retirement, the easier the better. And, it can’t get much easier than putting money into your 401k plan at work.
Set up an appointment with the financial adviser at work to discuss where your money should go. After you’ve picked investments to suit your needs, set up a percentage of your paycheck to be put into your 401k each pay period. If your company provides a match make sure you’re contributing enough into your 401k to earn the full company match.
Open a Roth IRA
If you’re like me and don’t have a 401k plan to contribute to a Roth IRA is a great option.
You can open up a Roth IRA with the help of a financial adviser, or if you’re comfortable doing so, you can open one up online by yourself. With a Roth IRA you have endless investment options. This means it’s important to do your research on what investments will coincide with your plans.
The great thing about a Roth IRA is that you’re putting taxed dollars into the account. This means at retirement age you won’t be taxed on the money you withdraw.
If you’re able to max out your 401k plan at work you can open up a Roth IRA as well.
Invest in Dividends
If you’re having fun watching your money grow in your retirement accounts you can add some dividend investing to the mix.
Dividends are paid regularly to shareholders owning the dividend paying company’s stock. Not all stocks pay dividends but many big name companies do.
The greatest appeal of investing in dividends is that you receive a check, typically quarterly, and if you purchase enough dividend stocks you can supplement your income now and in retirement.
For Right Now (Active)
We’ve covered retirement, but obviously you have to first earn money before you can invest it.
Here are three ways to earn money now, but keep in mind you have many options to increase your income.
Choose the Right Career
Choosing the right career is probably the single most important thing you can right out of college.
You want a career that you enjoy but in addition to that you need to earn a salary high enough to support yourself.
Other things to consider are a company’s retirement and benefit plans. Also, if you plan on staying with one company long term there needs to be opportunity for growth.
Start a Side Hustle
Who says your income should only come from your day job?
There are many young people who have turned their side businesses into huge, million dollar businesses. This may not happen for you but earning money on the side is never a bad thing.
If you want to accelerate your saving, investing, and partake in a little splurging, a side hustle can help.
A side hustle consists of anything you do outside your day job to earn extra money. The possibilities are limitless.
Invest in Real Estate
I bought my first (and only) flip house when I was 23. I’ll admit; I got extremely lucky.
I found a steal on a foreclosure and since there were multiple bids on it I offered a couple hundred over the asking price and got the deal. The house was already nice with minimal repairs needed. I went in painted a couple rooms and put the house back on the market. Luckily, I sold the house very quickly and made an easy profit of around $9,000.
I’ve kept my eye on houses in my area since then but haven’t come close to finding a great deal like I did the first time around.
Real estate investing can be pretty risky. However, the rewards can also be huge. If you want to invest in real estate whether that entails renting a property or flipping a house, start saving now. This way when that deal of a lifetime arises you’ll be ready to jump on it.
What Do You Think?
These are six income sources that if you set up in your twenties can help you get off on the right foot financially. The important thing is for you to choose what feels best to you and give it your all.
Implementing good financial habits in your twenties can save you from a lifetime of worrying about money.
What do you think? Would you add anything to the list?