What I Wish Someone Had Told Me About Building Wealth in My 20s…
***Disclaimer – I’m not a financial advisor, just a normal guy with financial success. The information shared here is purely for educational purposes only***
I’ve always been a motivated saver and interested in business, so money was something that I studied carefully in college and even in my early working careers. Knowing what I know now and being in my early 40s, there are lessons I wished I had applied earlier in my post college career to put myself in better financial situations now. Here are some of the things that I wish I had known and applied back then.
Lesson #1: Grow My Wealth Slowly and Carefully
I wish someone had told me that growing wealth takes time and to take my time doing it. There is really no way to “get rich” quickly unless you win the lottery or scam other people to make it happen. Lottery is called lottery for a reason and scamming others to get ahead is not a sustainable solution anyways.
Of course back then, I wanted to know if there are “accelerated” way to grow wealth and the answer is yes and no. You can be aggressive in saving and investing, but growing wealth still takes time regardless of how aggressive you are with investing. So yes, you can be aggressive in saving money and investing, but you can’t control how fast the investment grows. Generally speaking, it takes 15-20 years (or more) for the investment to mature significantly.
I tried day trading for a couple of years (big mistake) and have lost over six figures in the process. Here is an important lesson, learn what you are good at and what you are not. What I should have done is, try day trade for a little bit, know my limitation and turn the money over to professional money managers to invest my money, that’s what I do now, I leave the investing to the professionals and focus on what I do well.
One thing I did not do is to put more money towards day trading than what I could afford. The money I invested were always extra money or money I know I can pay back for sure, so though I did lose well over six figures overtime, the losses did not cripple my finances for years to come.
Lesson #2: Save Aggressively Especially in the Beginning
Money takes time to grow. Once the money is invested, the money is doing all the work for you, but again, it takes time for it to multiply. So I would tell my younger self to save aggressively like there’s no tomorrow in the first few years out of college and invest them as much as you can.
The reason being, if we look at the retirement accounts, usually the growth in the later years by total amount is significantly more than the former years. That is the because once the money grows to a certain mass, the interest and dividends generated by the investment is significantly more than what you put in overtime.
For example, let’s you invested $10,000 in your first year of investing and your money grew by 8%. Great, you now have $10,800. Now let’s say it’s year 10 and you now have amassed $1,000,000, growing the same 8% would net you $80,000! So you would have $1,080,000 total. So the thinking is you want to get to a nice big chunk of mass of investment as soon as you can, so it will grow at a more significant clip later on.
Building a strong foundation for that investment would have shaved off a few years that I’d have to work now. So if you are in your 20s and you are reading this, I hope this will benefit you the way I wish it could have benefited me back then. But I am doing pretty well now, so can’t complain☺.
Lesson #3: Let the Professionals do the Investing for You
This lesson might not apply to everyone as some people are very gifted as investing and have great success running their own investment, but it’s probably true for the major of us (for me for sure!). My money has grown comfortable for the 10 years or so since it’s been professionally managed rather than self-managed.
If you are great at investing, more power to you and I wish you great success. But for most of us mortals, it’s more prudent to pay a small fee each year and have professionals do what they are paid to do. Your retirement plan (if you joined one) is an example of a professional portfolio. If it’s a reputable firm, you can usually expect your money to double every 7-10 years, depending on the market conditions.
The $100,000-$150,000 or so I’ve lost over the years trading would easily be worth between $250,000-$350,000 today, meaning I’ve potentially lost out on that much wealth in my net worth, ouch, I hope you can avoid that.
Lesson #4: Draw up a financial and cash plan early
Looking back, I wish I had been making spreadsheet and draw up plans on where I want to be net worth wise in 5, 10, 15, 20 years etc. like I do now. Coming up with a roadmap early and sticking with it would greatly increase my chance of success early on.
Of course projections and plans are just plans. Things don’t necessarily always go your way, but having a plan is nevertheless better than searching blind on where you want to be in a few years. I notice that when I don’t plan things out carefully, life and time often slips by you, and before you know it, you didn’t accomplish what I wanted to accomplish since you didn’t plan it.
In Conclusion
So here you go, these are some of the things I wish I had focused on more early on in my working life. These are things I work on all the time now to make sure our family wealth is trending in the right directions. I share these things in the hopes that fewer people will make the same mistakes that I did.
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***Disclaimer – I’m not a…