I have thought long and hard about how to best convey how people in their twenties can put themselves on the path to financial independence. I did my whole “how to get rich” series but didnt really give specific information for people of each age group. With a lot of help from the great members at sweat4health, I finally distilled it down to two simple rules:
- Save at least 15% of your gross income every year
- Do not have children until
- you have been in a committed relationship for 2 years
- you have saved at least $15,000
- you have consistently accomplished #1
At first I had all kinds of things about cars, buying houses, student loans, and consumer debt. The thing is, this can be generalized and made much simpler by the above two rules. As long as you can save 15% of your pre-tax paycheck then you are on the road to financial independence and it does not matter whether you invest that money using DCA in a low fee index fund like Vanguard’s VOO, invest it in real estate, or invest it in your own business. If you are able to save 15% every year, you are going to make it. Remember, it does not matter how much you make, its how much you save that counts!
3 teenage mistakes that guarantee financial ruin
In my last video on this subject, I just did it while biking without making a script first and I regretted it because it was not as coherent and concise as I like to be. Also it emphasized the negative (financial ruin) and not the positive (financial independence). In this video I said that the following three mistakes made in teenage years would lead to financial ruin:
have kids before age 20
buy a car before age 20
get consumer debt that you cant pay off in full every month
Although these are true, its too specific and needlessly complex. If I were to do this video again, I would state it as follows – the following two mistakes made in teenage years will lead to financial ruin:
- have kids before age 20
- get consumer debt
The “car thing” needlessly distracted people from the primary point. If mom and dad give a car to you as a teen, thats fine. If the insurance, gas, and maintenance are too high you can just walk away from the car – the main point is AVOID CONSUMER DEBT. This also means student loans, they are simply too risky. An education is great but work part time and go to your local community college to get your two year degree. If you do well and like it then look for full scholarships for a 4 year degree.
Two simple rules to get rich in your twenties
Two teenage mistakes that guarantee financial ruin
It sucks. There IS no secret. Whether you are 17 or 27 the way to financial independence is the same and its hard work requiring delayed gratification. You have to avoid consumer debt and save money consistently.