Your 20s are full of new experiences: Moving out of your parent’s house, graduating college, getting a “real” job, and beginning a life of your own. However, one responsibility that you’ll also want to start tackling is how to invest.
You might think that just because you’ve got student loans or are living paycheck-to-paycheck that it’s too soon to get involved with investing.
But this is precisely the time that you’ll want to start learning these strategies and mastering the techniques that will make you wealthy later in life.
In this post, we’ll talk about the 5 best ways to get started with investing and what you can learn from each of them.
1- Start Recognizing Money-Making Opportunities
One of the first investments I ever made was a simple one. Back when online banking was brand-new, I did some research and determined I could make almost $500 if I moved a huge chunk of my savings into an online account.
That might seem like such a small accomplishment. But at the time, it taught me a very valuable lesson: Where you save your money can make all the difference in how hard it works and what it ultimately achieves for you.
To this day, whenever I invest, I still think about where my money is going and how this decision could benefit the potential return.
The sooner you start recognizing these types of money-making opportunities, the faster you’re going to start putting your money to work for you.
2- Get Comfortable with the Markets
I’ll be honest – Investing scared me at first. The idea of putting my money into something where I might never see it again seemed like insanity to me.
Investing wasn’t like putting my money in the bank where I’d earn a nice, predictable interest rate. Investing meant taking a “risk”, and I wasn’t sure this was something I wanted to do.
Then, one day, I just went for it. I put $1,000 into a mutual fund and watched what happened …
Guess what? Doomsday never came. My investment went up or down by a few dollars here or there, but it never bombed like I thought it would. In fact, it seemed to go up in value on average the more time I gave it.
That’s when I learned one of the biggest challenges to investing was just getting over those initial market jitters. Over the long-term, there’s money to be made. You just have to get past your own fears and inhibitions and learn to ride out the market turbulence.
3- Take Full Advantage of Your Retirement Accounts
When I started my first professional job, I knew absolutely nothing about 401k plans. And to make matters worse, it seemed like no one really wanted to take the time to explain it to me or help me to understand why I should be contributing to one.
Fortunately, I was curious enough to go seek out this information myself. And boy did I learn what a golden opportunity this was!
First of all, I quickly found out that for every dollar you contribute to your 401k plan, it reduces the amount of taxes you owe to the IRS at the end of the year.
For doing nothing more than simply stashing my money away, I was saving thousands of dollars in just taxes alone.
But then the good news didn’t stop there. I also learned about employer contributions and how they were another sure-fire way to almost double your contributions.
(Yours might be different depending on how your employer matches contributions).
Finally, I also got to know about the power of compounding returns. By taking full advantage of my retirement accounts in my 20’s, my modest contributions would have the power to grow to potentially millions of dollars by the time I would be ready to retire.
It was mind-blowing!
The takeaway: The sooner you start contributing to your retirement plans and understanding the rules, the more wealth you’ll ultimately accumulate.
Whatever you do, don’t delay. Start using your plans today.
4- Ignore the Noise
I hadn’t been investing or contributing to my retirement plans for very long when the Great Recession of 2008 hit.
Suddenly, the stock market was down by almost half of its earlier value and everyone I knew was beginning to panic. I began to think I should be doing the same …
Thankfully, I then stumbled across a tip from investment guru Warren Buffett that I still carry with me to this day:
“Be fearful when others are greedy, and be greedy when others are fearful.”
His point: When the markets dip, don’t do anything hasty that you’ll regret. To be successful at investing, you have to go into it with a long-term mindset. You have to stay the course.
By doing this, you’ll not only be able to dismiss all the noise going on around you, but you’ll also be able to take advantage of opportunities that are only going to help you achieve your goals sooner.
Against my fears, I actually started increasing my 401k contributions so that I could scoop up as much of this discounted market as I could. Years later, I can say that was a move that paid off in a big way!
5- Define Your Long-Term Financial Goals
I remember as I was becoming more comfortable with investing and retirement planning, I started making calculations that showed I could potentially achieve financial freedom in my 50s or even 40s.
That got me even more excited about what I was doing because it showed me that shaving 10 years or so off of my working timeline could be a reality.
This is an important step that I believe a lot of people miss when it comes to learning how to invest.
Having the technical know-how is great and very useful. But it’s really the action of defining your goals and determining what you want from all of this that gives your efforts their purpose.
Remember, too, that your goals can be fluid. The goals you have today may not be the same goals you’ll have 5 or even 10 years from now. And that’s okay.
The important part is that you’re building up towards something that you feel currently will bring the most value to your life.
The Bottom Line
When it comes to your finances, your 20s can become the foundation from which your future wealth is generated.
Use this time to learn about how money works, how you can make it work for you, and ultimately what you’ll want to do with it once you have it. Happy investing!
Contributor’s opinions are their own. Always do your own due diligence before investing.