Call me melodramatic, but I'm starting to feel old. I think I have more than a few reasons to feel that way; I'm nearly thirty (and will actually be thirty later this year), my wife is pregnant, and before the year is done, I'll be a father. Oh yeah, if that somehow wasn't enough, I'm currently sitting in a hospital room undergoing a week-long test to determine why I keep suffering from seizures. It's enough to make a guy feel like his best days are behind him.
But that's the thing: your best days are never behind you, as long as you are willing to learn and grow from everything you do. Furthermore, as long as you are willing to read ahead and discover what you will likely be facing in your future, you can plan accordingly and ensure that you are ready for what will happen.
Which brings us to this article. For over three years now, I've trying to learn as much as I could about money-management in general, and investing in particular. I've written hundreds of articles sharing what I've learned with my always enthusiastic readers, trying to help pass along all the knowledge that I've learned in the most comprehensible manner I possibly can. This article, inspired by this post over on The Digerati Life, is my attempt to break all of it down into a few simple points for my fellow twenty-somethings, with the hope of helping them get a handle on this money-management thing while they still have the vast bulk of their lives ahead of them (and yes, my fellow twenty-somethings, you do have two-thirds to three-quarters or so of your life still to go most likely, so it's definitely better to act as though you have decades, perhaps even a century or more, of your life yet to go). To do well, financially, you need to:
1. Earn More Than You Spend: This is the most simple lesson I can pass on, and yet it's one of the hardest to follow (and I include myself in saying it's difficult to follow). Even nowadays, as banks are tightening the restrictions on who they give lines of credit, it's still far too easy to owe much more than you earn. I'm not saying you should never take on debt (student loans and mortgages are generally a good idea, as long as you do everything possible to keep them to a minimum), but making sure that you pay them off as soon as you are able, and then put aside a portion of your earnings in investments, as in:
2. Invest a Sizable Amount of Your Income: I realize that for most twenty-somethings, the last decade or so could not have done more to get you to stay away from investing. Between the crash after the Dot Com Bubble at the beginning of last decade (when most twenty-somethings were still making their way through high school) to the Great Recession starting in 2008 (when most twenty-somethings were starting to get out into the real world), the real world has been pretty good at scaring you away from investing, particularly in ‘scary' investments like stocks.
Here's the thing, though: if you try to stick with bonds and other ‘safe' investments, your money will grow so slowly that you'll never be able to retire, at least, without investing half of your income or more. Instead, you need to take advantage of the higher investment returns offered by the riskier investments. You can, without too much trouble, cut down the actual risk you'll face by taking advantage of diversification, buying broad mutual funds rather than individual stocks. Just make sure you invest, as you'll have years, decades even, of extra time to build up your savings if you do.
3. Take Advantage of Your Lack of Responsibilities: You might be thinking, “What lack of responsibilities? I have a job, an apartment, possibly even a spouse; I've got more responsibilities than ever before.” True, but this is only the start; before long, you'll likely have children, a mortgage, and even more responsibilities than you probably think are possible. By comparison, right now you are as free and unhindered as you will be in your adult life, and using that time to build up your monetary situation is a great idea. The money that will, in no more than a few years, go to supporting children can currently be spent to generate an emergency fund or support various types of side income. Speaking of which:
4. Try Your Hand at Various Side Hacks: In case you think I dislike being alive at the current time, know that that is not it at all. There are plenty of advantages to being part of the Millenial generation, and one of the best ones is the fact that you can start a multimillion, perhaps even multibillion, dollar company from the comfort of your computer. A complete list of all options available to you, even just in the realm of blogging, would take an entire article itself (like this one, for example), but the key is, as long as you keep your eyes open, you should come up with some ideas.
5. Don't Panic If You Run Into Trouble: At some point during your life, you're going to run into trouble, financially or otherwise. Perhaps you'll lose your job, or you'll find yourself facing an emergency without enough funds to cover it, or you have some health problem that you don't know how to handle. I'm not going to lie, any of these issues (or any of the others I'm not mentioning) can be devastating, to say the least. Here's one thing to keep in mind, though: as someone who is still fairly young, you have time to pick yourself back up, dust yourself off, and get back on track to achieving your goal. It can be tough at times, nobody will deny that; but the advantage to being young and resilient is that you have the time, and hopefully the willingness, to recover from all the problems you will face in life.