The 7 BEST Purchases To Make In Your 20s
So your twenties are a truly amazing time. Most people in their twenties don’t worry too much about what they’re buying, cause they’re most likely not married yet and they’re just looking to have a good time.
But the truth is if you make smart financial decisions in your twenties, like I managed to do, then you can set yourself up for a whole life of freedom, rather than just 10 years of fun.
Nothing stopped me from making smart financial decisions and having fun at the same time, the two aren’t mutually exclusive. But if you’re reading this post in your twenties, then this has the possibility to send shock waves through your entire future.
Each of these purchases are different, so it’s really important to read the post all the way to the end. Otherwise, you could miss out something really crucial. Remember this isn’t financial advice, these are just things that I’ve done that have helped me become a millionaire and grow my wealth starting from zero.
Number one is investing in a side hustle. Now, I know this term gets thrown around a lot on the internet and you’re probably sick of hearing it, but it’s absolutely one of the best ways to grow your wealth in your twenties.
It’s also quite high risk, but the power is in your hands. And of course, you’re gonna fall some risk at a young age. I found myself falling into a lot of bad debt just before I turned 20, and I know this wasn’t where I wanted to be.
I was being bullied by my manager at work and doing repetitive jobs making wooden trash cans day in, day out. I was getting paid just enough to get by, so I needed a plan to help me escape and get me debt-free as soon as possible.
Investing my money into some sort of side hustle was my only hope. Side hustles, you’re my only hope! I looked for opportunities anywhere I could.
And when I found out my friend’s dad was a car dealer who had lots of trading cars, I decided to buy a car I liked every week. I’d do a full detail job, advertise and sell it. This left me with the inconvenience of having hardly any money in the bank account, and no car to drive after I’d flipped it.
After a year, this side hustle had not just clogged me out a debt, it had given me considerable savings, which I later use to escape my nine to five job and lay in the foundations of my now million dollar business.
When you invest your money in a side hustle it’s entirely up to you to put in the effort and make it successful. In my situation, I had little choice, I had to succeed.
Car flipping might not be for you, so my advice is it’s always best to play to your strengths. Maybe you like gaming, creating websites, photography, graphic design, tutoring, or maybe even YouTube!
With any of these side hustles there are things that you can buy to increase your earning potential, such as a laptop, which allows you to edit at high standard. The key is to survive on your income and invest all the extra money back into the side hustle or some of the suggestions in this post.
Number two is buying an index fund in a Roth IRA or an ISA. I get it, investing in index funds might not sound like the most exciting thing at first, but wait until you hear these numbers.
If you manage to save or make an extra $200 per month and invest it in a simple S&P 500 Index Fund, which historically has averaged a yearly 10% return since it was created, then in 45 years, you will have over 2 million dollars!
Assuming you’re investing within a Roth IRA account in the USA or an ISA in the UK, then this money will be completely tax-free!
But, I don’t want to be rich when I’m old and gray like you, I want it now while I’m young! Let me make this clear. I’m not saying you have to wait to be rich. This is just an investment of $200, which you can generate from a side hustle.
You still have the potential to make much more money. I like to think of this as a backup that’s just building up in the background. I started my investment journey in my early twenties, as a friend of mine said that by keeping my money in the bank it was just losing value due to inflation.
I decided I needed a backup plan, I had no doubt in my mind. I can make a lot of fast money from my businesses, but just in case, I decided a safety net would be a good idea.
This is where the index funds came in. I invested a small amount every month instead of spending it. I would always pretend it wasn’t mine. I even set it up so the money automatically came out of my bank account before I even saw it.
I’ve got no intention of ever needing this money, but it’s always there, and it’s growing just in case. An index fund is great, as its basket of lots of different companies.
So it’s a lot less risky than putting all your money in just one stock. Imagine an index fund is like owning a bunch of chickens. With one chicken, you have to worry about the chicken dying of disease, getting eaten by a fox, or even getting lost.
But the likelihood of losing a whole flock is pretty small. To extend the analogy a bit further, imagine you have a problem with thieves coming in the night and stealing all your eggs. This is kind of like when the government taxes you on your capital gains. What you really need is a top of the range chicken fortress that’s impenetrable.
This is what a Roth IRA is in the USA And an ISA is in UK. You invest your money within one of these accounts and all your profits are tax-free. These accounts are so powerful, they even limit the amount you can contribute each year.
Number three is buying a plane ticket. This one might seem a bit strange. You may be thinking, “how is a plane ticket gonna help me in the future?”. Well, traveling can really give you so many opportunities. I managed to travel all over the world in my twenties, which built up my confidence and my contacts.
These came in really handy for me later on when I needed to start producing products in China to expand my business. Traveling also doesn’t have to break the bank.
Maybe you’ll have to buy a few plane tickets, but you can also use credit card points to travel for free. The idea is to open up a new credit card, meet the minimum spend and get the points bonus, which you can redeem for free flights.
But that isn’t actually free, you have to spend money to get it! Well actually, you don’t need to spend any more money than you normally would. Instead, you can put all of your normal expenses on the credit card. Just make sure to pay it back in full at the end of each month and you’ll never be charged any interest.
As a bonus, you’ll also be building a great credit score for when you want to buy a house in the future. This credit score will give you access to much better mortgage rates and end up saving you lots of money.
I actually once got a free trip to California for me and my girlfriend while we were in our twenties. I also managed to close a huge business deal at the same time! Credit cards have really been demonized by lots of parents and boomers, but if you use them responsibly, then they can give you huge advantages.
Number four is spending money on education. This is by far one of the most important things, and it’s too often overlooked. Purchasing any type of education to better yourself is a no brainer.
At the end of the day, everyone is paid based on their perceived value. So if you’re able to increase this by learning a new skill, then you’re going to dramatically boost your wealth.
I chose to invest in books in my twenties as unfortunately that was pretty much the only option I had. Nowadays, there are so many different alternative sources for education, like certain courses and even YouTube.
Just don’t go spend $997 on a course sold by some kid standing in front of a Lambo saying its going to change your life. Because I’ll tell you what, the truth is it is gonna change your life, it’s gonna make you $997 poorer, that’s for sure. This isn’t just about investing your money, it’s also about investing your time to actually learn something valuable and being open to new ideas.
The cool thing about being young is that you can learn things much faster, and then they stay with you for the rest of your life. I used to say to my son, be the sponge, and soak up all the knowledge you can.
Reading “Think and grow rich” in my early twenties really changed my mindset forever. From this moment onwards, I would always set myself a goal and a date in mind when this would be achieved.
I learned that it was no good just saying I wanted to be a millionaire one day, I had to have a solid plan in place. This isn’t the actual one, but I paid about $5 for my copy and it was probably one of the best investments of my life, and that was just one book!
Look, I get it if you don’t enjoy reading. To be honest, neither do I. I much prefer watching videos or listening to Audible, but that’s the cool thing about the internet, you have so many options nowadays.
Number five is buying real estate. There’s no denying that buying a property is one of the fastest ways to accelerate your net worth at a young age. I bought a property for $100,000 in my twenties, and it’s now worth over half a million. The rental income I receive is also great, as it’s a consistent cashflow.
In addition to this, if you own real estate, then you have a great opportunity, cause you’ve got a tangible asset which you can use as leverage.
This has always allowed me to have access to the best loan rates, which I use whenever a great investment opportunity comes along. It might not be as easy nowadays to buy a property, especially in your twenties, and I understand that. But a great way to get around this is to do something called “house hacking”. This is when you put down a deposit on a house and get a mortgage.
Let’s say your mortgage payment was $1000 a month, you would then just rent out a couple of rooms and get them to pay off your mortgage for you. Alternatively, if you don’t want someone to live in your house, you could buy a duplex, which is one house split into two with two separate entrances.
If you don’t like either of these two options, then you could look into becoming an Airbnb host. The whole idea is to get other people to pay for your real estate so you don’t have to.
Number six is purchasing cheap, reliable transportation. A used car is essential, as it will allow you to work on your own schedule, meet deadlines, and take advantage of any new opportunities.
In my early twenties, I made the mistake of having a really nice car. It was a Ford RS Turbo. To be honest, I just wanted to show off to all my friends and maybe get a girlfriend.
Being a ginger back in the eighties wasn’t a great look, I needed all the help I could get. That car ended up getting stolen but it actually turned out great, cause I managed to get an insurance payout.
This time, instead of getting a new car, I used the money to buy cheap, used Peugeot. It wasn’t much to look at, but I was in my twenties and no one expected me to be a millionaire.
So I used the rest of the money to invest and expand my business. I’d already met my future wife, so I didn’t need to impress anyone else. The real lesson here is that an expensive new car does three things.
It locks your money away, It could put you into debt if you buy it on finance and it will lose value like crazy! Freeing up my cash helped expand my business to new heights and of course, I had no fear of the Peugeot getting stolen.
To be honest, I don’t think anyone’s ever stolen a beige car. The one exception for buying a new car in your twenties is if you think it’s a good financial decision for your business. This is the only reason my 23 year old son has bought his Tesla Model three, as he can write-off the entire car as a business expense and get a tax break.
Before that he was driving around a used 20 year old Toyota Yaris. I always advised him to live like a student for as long as possible and invest as much as he could. I was happy to advise him, but I wasn’t giving him any handouts.
Number seven is buying Bitcoin. Bitcoin closed out 2020 as the best performing asset of the last decade. So at this stage, it seems silly not to own a little bit.
I would love to share a story of how Bitcoin changed my life, but it just wasn’t around back when I was younger. I’m all for diversifying my portfolio into crypto like Bitcoin and Ethereum as the growth has been insane over the last two years, and I’m excited to see what the future holds.
In my opinion, owning a small percentage of wealth in crypto is a good idea, but I do have a problem with people YOLOing their life savings into one asset in hopes that they can achieve thousand percent returns.
Take the Doge Coin millionaire for example, he invested around a quarter of a million into doge coin at 4.50 cents a coin, before the mainstream media and Elon Musk tuck their claws in.
Among all the Elon madness and mainstream media hype, he managed to rack up over 2 million from his Doge investment. Fast forward it a few months, and he isn’t even a millionaire anymore.
Now I’m sure he’ll be okay, and he’s achieved huge returns, wherever he’s a millionaire or not. But the point I’m making is you never know when all time highs and lows will be.
Crypto has undeniably been returning investors more profit than the stock market, so it makes perfect sense to buy and hold some crypto, especially Bitcoin and Ethereum.
Just remember to only invest what you can afford to lose and ensure your investment portfolio is diversified across as many sectors as possible.
It’s very important to invest in your health, as the healthier you are, the harder you’ll be able to work without becoming burnt-out. This is something I learned a little bit later after becoming very ill in my twenties from grinding all the time.
My doctor even told me I needed to take a break! So the big takeaway here is your twenties are more important than they might seem. Compound interest is an amazing thing which can either set you up for a lifetime of success or start you down a path of snowballing debt.
As I mentioned before, in your twenties you can afford to take a little bit more risk when it comes to investing and starting a business. This is because you have so much time to make your money back if something goes wrong.
However, I still believe these risks should be calculated and with a long-term plan in mind. The people that look for a way to get rich quick usually just end up being scammed and then overtaken by the people with a long-term outlook.
A way to make this all easier for you is to spend time with people that are like-minded and more successful. This way, you won’t be constantly tempted into bad choices. I always thought that buying things just to impress others was a pointless pursuit that would just leave me with less money and less freedom.
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