You know you need to do it – get out of debt, start saving and investing, but for the most part, you’d really rather not think about it. You just want it all to work out and you’d rather be living your life. I mean, you moved out, went to school, got a job, and now you want to enjoy the fruits of your labor!
I know that feeling! After I graduated from college, I had student loan debt. But I also had a good paying job and I was side hustling and earning good income. I wanted to spoil myself a little bit as a reward for school. I went out and bought myself a fancy new car – the most money I’ve ever spent in my entire life. And honestly, it felt great. And I loved driving that car (and I still do – I still own it and drive it everyday).
But having things and spoiling yourself only gets you so far. It’s a nice reward and perk, but you can’t live your life that way. What I wanted (and I suspect most want) is to start building real wealth. I wanted to lay the foundations to building a great future, but I also didn’t want my life consumed by money matters.
I wanted real wealth. According to Webster’s Dictionary, wealth is a large amount of money and/or possessions. And while my car was the largest possession I had at the time, it was continually losing value and actually decreasing my wealth. I originally paid about $30,000 for my car, and it’s worth about $10,000 today. What a sucky way to build wealth.
Instead, I had to do something different.
Building Wealth Starts With Getting Positive
If you want to build real wealth, you have to be positive. And that’s a little play on words, because I’m really talking about two forms of being positive:
- Positive Attitude
- Positive Net Worth
First, if you want to build wealth, you have to have a positive attitude about money. I hate getting all “Suze Orman” about money, but I’ve found it to be very true. If you have a negative mindset with money (I can’t get out of debt… I can’t earn enough money… I’m scared to invest…); well, guess what? You’re not going to build wealth. You’re mentally going to keep yourself in a trap about money and until that mindset changes, you’re not going to move the bar with building wealth.
Second, the first step in building real wealth is working towards a positive net worth. If you’re in the negative – because you have more debt than assets – goal number one is to get to $0, then to build a positive net worth. When I graduated college, I was very close to a positive net worth, because although I had student loan debt, I hustled and paid it down as fast as possible. I also worked full time during college and saved as much as I could, including taking advantage of my company’s 401k.
If you’re looking to build a positive net worth, you need to set a goal for $0 and start working your way out of debt. I hate “budgeting”, but look for ways to make more than your minimum payment. Maybe it is by working more, but maybe it is by cutting some costs. That’s a personal choice, but having a positive net worth is worth it.
Hustle, But Be Smart About It
If you really want to build wealth fast, you need to hustle. I’m a big fan of hustling to build wealth, as it’s one of the key tactics that I’ve used my entire life. If you remember when I shared facts about me you probably didn’t know, I’ve been a side hustler my whole entire life.
I’m a big believer in the fact that the potential to earn extra money is limitless. I’ve rarely been “worried” about money because I trust in my ability to earn it. Yes, I can cut expenses, and I don’t live an extravagant lifestyle. Looking at my spending habits, I could probably lose $1,000 in spending per month if I really took everything down to the barebones. On the flip side though, the amount of extra income I can earn has no boundary. In college, just selling stuff on eBay and hustling online, I could earn that same $1,000 per month.
Today, I work full time and side hustle, and earn much more than that.
One of the best mentors for hustling is Gary Vaynerchuk. This guy is the epitome of a hustler. I highly recommend you watch his video on entrepreneurship below.
But at the same time, you need to be smart about hustling. I don’t think it’s fair for everyone to commit 19 hours a day to working like Gary did. Every is at a different season in life. If you’re in college, you probably can hustle 19 hours per day. But if you have a family, some of your personal wealth should come from spending time with them. And in that case, you need to find a balance between hustling and family.
So be smart about earning more money, but remember it’s limitless.
Make Your Money Work For You
Once you start having a little money, you need to make your money work for you. I always find it amusing when people tell me they hustle and earn all this extra money, but then they do nothing with it. Do you think others who’ve built real wealth in their 20s did nothing with the money they made? No, they invested in and put it to work for them.
No matter how much money you have or where you have it, you need to make sure your money is working as hard for you as you worked for your money.
So, if you have savings, check out how to make your savings work for you by reading about the 10 Best Places For Short Term Saving and Investing.
If you fulfilled the minimum amount you need to save, start investing that money by building a diversified portfolio. As Albert Einstein said, “Compound interest is the eighth wonder of the world. He who understands it, earns it… he who doesn’t, pays it.” Do you want to be paying interest all your life, or do you want to start earning it.
To build real wealth in your 20s, you need to start investing as soon as possible. Young adults and millennials have the biggest advantage over any investor in the world – the power of time. When you’re 20, you have 10 years on someone who is 30. It’s simple math. But that extra 10 years of invest can results in $100,000s or even $1,000,000s more in wealth over time.
Automate Your Wealth Building
Once you lay a foundation of building wealth, you want to stop thinking about it. I don’t mean ignoring your finances, but really being able to not have to check it daily. This comes through automation.
Just like letting your money work for you, you should have financial tools work for you so that you can automate your wealth building.
Some key tricks that I’ve used over time include:
- Setup your direct deposit to deposit money into several accounts for you. Most employers allow you to choose more than one way to direct deposit your money. I initially setup 10% of my paycheck to go directly into my savings account for me, so I never had to think about saving money. It would just happen. I also set it up so that another 10% goes directly to my brokerage account to invest. There are several ways to do this, and you can see how I setup an automatic Roth IRA.
- Setup automatic bill pay on a credit card. Where ever possible you should use a rewards credit card to pay all of your bills, and you should use automatic payment as much as possible so that you don’t have to think about it. Imagine paying all your utilities, your phone, and any other recurring bills using a single card. Now, you reduced the number of payments you have to make to just one – the credit card. Make sure that you pay your balance in full each month if you do this method.
- Use Online BillPay for the remaining bills and use this trick. If you can’t pay a bill with a credit card, such as a mortgage, consider using online BillPay with this simple trick. Instead of making one monthly payment, setup bi-weekly payments for 50% of the amount. So, if your mortgage is $2,000 per month, setup bi-weekly payments of $1,000. This will actually give you 26 payments, or one additional full payment per year. It’s a great way to “trick” yourself into making additional payments.
Finally, never stop. Building wealth in your 20s is all about front loading your life. You want to do as much as possible as early as possible so that you can reap the rewards later. But this shouldn’t be a one-time thing or just something you focus on early on. These are skills that you can build to grow your wealth.
Starting early is the key, but never stopping is even more important. Your money life is a marathon. You have different sections of the race. You have the start – and getting a good start is key. But then you have 26 miles in the middle before you get to that home stretch. And in your life, that middle section is from 20 to 70 – because we’re living longer and working longer. It’s crazy to think that millennials today may be working into their 70s as the norm. And even at that point, they may have a good 30 years in retirement. That’s a long time.
So, to build real wealth in your 20s, get a great start, follow these tips, and never stop hustling.
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him here and here.
He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.