There’s a reason that every old person will tell you that your 20s are the best time of your life. You’ve got your youth, you’ve got your whole life ahead of you, you’ve got all sorts of different options, and you’ve hopefully got your health.
However, one thing that you probably don’t have is a ton of money. The average person makes way less money in their 20s than when they’re older and that’s been true pretty much forever.
20-year-olds probably also don’t really think too much about what it is they’re buying. You might not have kids yet, you may not have a mortgage, and retirement is so far away that you hardly ever think about it.
But, what you buy in your 20s can set you up for a successful and happy future. And you may not have the opportunity to buy certain things once you have more financial responsibilities later in life.
So, in this article, I’m going to tell you about 7 things that you should definitely put your money towards while you’re in your 20s. These are the 7 best purchases to make in your 20s.
#1: Continuing Education
Whether or not you graduated from a university, you’re still in university, or you haven’t been in school for years, one of the most important things to buy in your 20s is some form of education.
Continuing to educate yourself is one of the best ways to set yourself up for success later in life. It’ll help you learn new skills, broaden your perspective, earn more money, and move closer to your long-term goals.
And, no, I’m not saying that you necessarily need to take out a huge loan to go and get a master’s degree. But it might be worth paying for an online course on coding if that’s something that you’re interested in and that’s relevant to your current job.
I have a friend who taught himself quantitative trading in his 20s using only resources on the internet and it led to him getting a super high-paying job with a financial firm in New York City.
You see? Investing in your own education can open all sorts of doors for you down the line. Plus, it’s just rewarding to expand your knowledge.
I’ve talked about Udemy.com before in other videos and how it’s a great place to build a course and sell it to make passive income. But you should also consider taking some of the courses that other people have offered on the site. They usually aren’t all that expensive and you can learn some great stuff.
On top of that, reading books, getting a newspaper subscription, or paying for online classes are all great ways to continue educating yourself and building your skillset.
#2: Index Funds
If you look around at wealthy older people, you may assume that they all have super high-paying jobs that allow them to afford things like houses and cars and whatnot. But, the truth is that they may not have the highest-paying jobs in the world. They may have just put their money in the right places when they were younger.
And one of the best things you can do with your money in your 20s is put it in an index fund and leave it there. The earlier you invest, the more time your investment has to grow. And let’s look at exactly how that works.
Let’s say that you’re 25 years old and you start putting $150 every month into an S&P 500 index fund, which has had an average annual return of about 10% since it was created. If you keep that up for 20 years, by the time you’re 45, that’s could turn into over $107,000!
Now, if you wait to start investing in the S&P until you’re 30, you’re only going to have about $60,000 by the time you’re 45. And you’ve missed out on nearly $50,000 just because you waited those extra 5 years.
This is the importance of getting started in investing when you’re young.
Now, check this out. The average salary for a 25-year old in 2022 is $49,920 per year or $4,160 per month. You save 20% of that every month, which comes out to $832. If the S&P500 gives you that average return of 10% and you keep saving that much per month over the next 30 years, by the time you’re 55, you’ll end up with over $1.7 million. Not bad.
#3: A Good Used Car
Alright, so the last two things we talked about were investments, right? And most people don’t think of cars as investments. Most people lease or finance a brand-new car and end up spending a ton of money on something that’s just going to depreciate in value, and depreciate quickly.
For instance, all of these luxury cars depreciate about 70% in value over the first five years of ownership! But, if you look at the depreciation curve over the life of a car, you’ll see that cars lose value much more slowly the older they are.
So, there’s an opportunity here. Buy a super reliable used car that’s going to last you a long time. And, since it’s already old, it’s not going to lose much more value while you’re owning it!
In case you didn’t know, we here at Ideal have an entire YouTube channel dedicated to buying cars the right way. I’m talking about buying a car used, enjoying it for a few years, and then reselling it for the same or even more than you bought it for.
If you’re in your 20s and looking to buy a used car, I highly recommend watching a few of our hundreds of videos about how to buy a car and not lose any money to depreciation. Once you do, you’ll realize that new cars are just money pits and buying used is the way to go.
#4: A Plane Ticket
No, I’m not suggesting that you need to buy a plane in your 20s, but I am suggesting that you get on one and go somewhere new. Get out in the world and do a bit of traveling! I’ll let you in on a little secret: traveling gets a whole lot harder when you have kids to take care of, when you have to make mortgage payments, and when you have way more responsibility in a career.
Use the freedom of your 20s to get out in the world and learn and experience. Traveling when you’re in your 20s will help you understand the world better and will also help you understand yourself and what you want out of life. It will help you learn how to navigate in situations that are necessarily normal for you.
Plus, you can meet people that may become important contacts later in life. Maybe you backpack to Europe and meet a friend in Germany. And, then, 10 years down the line, you have to do some business in Germany and that person becomes a valuable resource.
Plus, traveling doesn’t have to be all that expensive depending on where you go. For instance, if you travel to a cheaper country like Thailand, you could survive on $20 to $30 per day! That’s only like $300 for two weeks.
If you want to travel through somewhere in Europe, it’s going to cost you a bit more money. However, trust me when I say that it will be worth the money.
You’ll have once-in-a-lifetime experiences, learn things that will help you later in life, and possibly form some great new friendships.
#5: A Good Mattress
As more and more studies are conducted, scientists are understanding more and more about the importance of sleep for things like productivity, physical health, and happiness. Dedicating 7 to 8 hours per night to sleeping is essential to maintaining a healthy and balanced lifestyle. And it’s also important for becoming successful.
According to SleepFoundation.org, people who are sleep deprived have trouble being focused and attentive, they’re more likely to make errors and omissions, and they’re more vulnerable to stress. They also estimated that fatigue due to sleep loss has an economic impact of almost $2,000 per year. So, as you can tell, getting good sleep is extremely important.
But, just because you get in bed at midnight and get out of bed at 8 in the morning doesn’t necessarily mean you got good sleep. Maybe you’re sleeping on an uncomfortable mattress and you’re tossing and turning all night.
Spend the money on a new mattress and invest in your health, your happiness, and your productivity. And you probably won’t have to completely break the bank either.
Yes, some mattresses are going for thousands and thousands, but I found a sale going on for a Nectar-brand mattress, which is one of the highest-rated companies out there. And it’s only $400, which is a solid deal and a worthy investment.
#6: New Clothes
Maybe, in a perfect world, you could just show up to work in sweatpants and a baggy t-shirt every day. And, to be honest, being that comfortable all the time does sound pretty amazing. But, the truth is that how you dress sends a message and changes the way that people perceive you.
Put yourself in the shoes of some 50-year-old looking to hire some young talent or a loan officer deciding whether or not they should grant a loan to an aspiring young entrepreneur. Would you have more confidence in someone in a three-piece suit or a t-shirt? I think we all know the answer to that question.
In fact, a 2014 Yale University study put that question to the test and they found that those who dressed in more professional clothes received more respect from their peers and felt more confident than those who did not dress professionally. No surprise there.
So, it’s super important to buy yourself a wardrobe that shows people that they should take you seriously and that will make you feel like a boss.
This is especially important when you’re in your 20s and just starting out your career and clawing for your respect. Trust me, invest in some professional-looking clothes and it’s going to go a long way for you.
#7: Real Estate
Buying real estate in your 20s is probably the best thing you can do for your long-term net worth. First of all, you’re going to have a physical asset that’s almost inevitably going to go way up in value over your lifetime.
If you look at historical median home prices, they consistently trend upward, making real estate a super solid investment most of the time.
Plus, there are some other amazing advantages to investing in real estate. Unlike an index fund or some other financial security, you can actually live in a house or rent it out and earn rental income. In some cases, you can even do both!
Imagine this: you buy a duplex and your mortgage payments are $2,000 per month. Then, you rent out one of the units for $2,000 per month to another family while you’re living in the second unit! That means that the other family’s paying your mortgage while you’re staying there for free!
Then, when the mortgage is paid off, you have a place to live, an appreciating asset that you have 100% equity in, and a stream of rental income! This system is called house hacking and it’s one of the best things you can do with your money. Period.
And, as if all that weren’t enough, the IRS gives you tons of tax write-offs if you operate a real estate rental company. Plus, you can even use your real estate property as collateral to secure the very best interest rate on a loan if you should find another investment opportunity that you want to go in on later in life.
With all of these advantages, if there’s one purchase on this list that’s really going to make you rich, it’s real estate.
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