Imagine you had a time machine. It allows you to go back in time and change one thing about the past.
What would you do?
I bet plenty of us WANT to say something like:
- Warn the Titanic about those pesky icebergs in the way
- Kill baby Hitler
- Tell Abraham Lincoln to Netflix and chill with Mary Todd instead of going to the theater
But the truth is, we’d all probably want to go back in time and give ourselves advice — probably on the best way to invest money and time.
Maybe you’d tell yourself to buy some Google stock the day they went public? Perhaps you’d just tell yourself to put down the fork and pick up a barbell more often? Or that maybe those skinny jeans you wore when you were 16 DIDN’T look as good as you thought?
No matter the case, there’s probably a world of things you’d probably want to tell yourself — and in doing so, you could impact your current life in a million positive ways.
Too bad time machines don’t exist…
That’s right. Little do you readers know, I’ve been hard at work constructing an advanced piece of machinery that allows you to actually know exactly what you should invest in during your twenties. Hop inside, and I’ll show you how.
Best way to invest money: Time Machine Investing
If you’re in your twenties, or even your thirties, chances are you have no idea how you should be investing your money and time — and that’s okay. Life doesn’t come with a guidebook and many of us are expected to just sort of “figure it out” when we graduate college.
Well, I’m here to tell you there’s a way to know exactly how you should be investing your time and money: Ask someone older (like me).
It’s not exactly a flying DeLorean or an inter-dimensional Time Lord, BUT people who have been where you are before know exactly what we wish we should’ve invested in.
Seriously, ask your parents or an older friend of yours what they would have done if they were your age. They’ll probably tell you a bunch of things like:
- “I wish I ate more healthily when I was younger. A big gut’s harder to get rid of when you’re old.”
- “I wouldn’t have picked up cigarettes that summer after college. Awful habit.”
- “I wouldn’t have stuck it out with that job that I hated for so long.”
It doesn’t even have to be anything bad. Hell, your dad might tell you something like, “I started investing in retirement during college and it was one of the best decisions I’ve ever made.” Advice like this can help spare you from tons of issues down the road…so why WOULDN’T you take it?
Well today, I’m going to let you in on exactly what I think someone in their twenties should be investing in.
Investment #1: Invest money to eliminate your debt
If you’re young and you have debt and you want to live a Rich Life in the future, your first order of business is to get rid of it. You can’t properly invest in yourself or your future if you have a mountain of credit card debt that you haven’t addressed yet.
Debt is the most common roadblock keeping people from finding success in their lives. That’s why I don’t allow anyone with debt to take part in any of my flagship courses, costing us millions each year.
If you’re in debt, it’s probably not even your fault. After all, we don’t come out of the womb knowing how credit cards work. There’s no “Paying off your loans 101” class in high school. And credit card companies aren’t trying to help you. In fact, they’re in the business to keep you in debt for as long as possible so THEY can make money.
Luckily, there are steps you can take to get out of debt no matter how much you owe.
I wrote an article detailing exactly how you can get out of it — but for now, I’m going to tell you that the first and best step you can take to getting out of debt is to simply be aware of how much you owe.
Seriously. That’s it. Though it may sound simple, finding how much you’re in debt is actually INCREDIBLY hard for many people to do.
This boils down to the simple fact that people feel guilty about their debt. They’d rather bury their heads in the sand and pretend their debt doesn’t exist than look at the reality of the situation and do something about it.
My advice to you: GET OVER IT.
This is exactly the attitude credit card/loan companies want.
I challenge you to step up and OWN your debt instead of letting it own you.
First step: Go through your account statements, call the companies, do whatever it takes to find out how much you owe on these bills. You can use this tool to track it (it’s the second link on this list). The chart looks like this:
It’ll help you find out how much you owe to each company and what your interest rates are. You can also use my free online tool here.
Stop right now and do this.
Congrats! Taking the first step is one of the hardest parts — now you’re well on your way to a Rich Life.
If your total debt number seems high, remember two things:
- There is a large group of people with MORE debt than you.
- From this day that number is only going to go DOWN. This is the beginning of the end.
If you need help getting out of debt, check out my absolute best resources on getting out of debt below:
- How to improve your credit score
- How to get out of debt fast
- How to use credit cards to rebuild credit
BONUS: For even more systems on eliminating your debt, check out my 3-minute video below on how to negotiate your debt.
Investment #2: Invest money early and often for retirement
I can’t tell you how many people I’ve talked to tell me they wished they started investing in their twenties — though if you’re NOT in your twenties and you’re reading this, there’s still time.
After all, the single most important factor in ensuring a solid financial future is investing. The sooner you start, the easier it is to get rich. There’s more than 100 years of evidence in the stock market testifying to that.
Still don’t believe me? Let’s look at a real world example.
Say you’re 25 years old and you decide to invest $500/month in a low-cost, diversified index fund. If you do that until you’re 60, how much money do you think you’d have (assuming a 5% return)?
Take a look:
That’s right. You’d be a millionaire after only investing a few thousand dollars per year.
Notice, I’m not talking about the Hollywood type of investing where hot-shot stockbrokers make huge multimillion dollar trades while yelling “SELL” into a phone for some reason.
I said you should invest in low-cost, diversified index funds over time. That’s because smart investments are about consistency more than anything else — not chasing hot stocks. Or other weird investments:
When it comes to long-term investments, there are essentially two ways you can do it — and I HIGHLY suggest doing both.
A 401k through your employer
Be sure to take advantage of your employer’s 401k plan by putting at least enough money to collect the employer match into it. This basically means that for every dollar you contribute, your company will match that (pre-tax!).
This ensures you’re taking full advantage of what is essentially free money from your employer. That match is POWERFUL and can double your money over the course of your working life:
Like your 401k, you’re going to want to max it out as much as possible. The amount you are allowed to contribute goes up occasionally. Currently you can contribute up to $5,500 each year.
I suggest putting money into an index fund such as the S&P 500 as well as an international index fund as well.
Note: If $500/month sounds like a lot, read all the ways you can free up that money with just a few phone calls.
Investment #3: Invest money for big purchases
The best time to grow a tree is 10 years ago. The second best time is today.
Man, it sounds like a cheesy motivational poster — but the adage is TRUE.
If you want to buy a house or a nice car one day, you don’t want to think about where you’re going to get the money the day you plan to buy it. You want that money to already be there.
That’s why I’m a HUGE proponent of automating your finances.
There are still people out there who have heard me harp on this for literal YEARS and still haven’t automated their finances. And why not? For a few hours of work, you can save yourself thousands of dollars down the road.
One reason many are averse to saving money is due to the pain of putting our hard earned cash into our savings accounts each month. That’s why we turn to automation. It’s a set-it-and-forget-it approach to your finances, allowing you to send all of your money exactly where you need it to go as soon as you receive your paycheck.
After all, if you had to track your spending and move money into savings every month it would eventually be one of those “I’ll get to that later…” things and you’d NEVER get to it.
And so, just like cutting out luscious, perfectly foamed 12 Corners lattes, we might put away money for savings once or twice — but if we have to make the decision EVERY paycheck, we’re setting ourselves up to fail.
That’s why automated finances work so well. You can start to dominate your finances by having your system passively do the right thing for you. Instead of thinking about saving every day — set it and forget it.
To do this, you need just one hour today to set everything up so your paycheck is divided into four major buckets as soon as it arrives in your checking account. They are:
- Investments: I highly suggest you put your money into a Roth IRA. Like your 401k, you’re going to want to max it out as much as possible. The amount you are allowed to contribute goes up occasionally. Currently you can contribute up to $5,500 each year.
- Savings: Here, you should use “sub-saving accounts” that you’ve created for long-term goals like your wedding, vacation, or down payment on your house. Many banks provide the option to create smaller sub-accounts in your normal savings account — perfect for goal setting.
- Guilt-free spending: Make automatic payments for recurring services like Netflix, Birchbox, and gym memberships using your credit card. You’re going to have plenty of guilt-free spending money in here for things like the occasional night out or fun purchases you want to make.
Be sure to log into your credit card’s website and set up automatic payments with your checking account so your credit card bill is paid off each month. You can rest assured that you will have enough money in your checking because you’ve already set up automatic payments with everything else.
- Fixed costs: These are for bills that can’t be paid off with a credit card such as rent, electric, water, and gas.
Once that money is in your savings account, don’t touch it unless you’re ready to pay for your long-term goal (or if there’s a HUGE emergency).
For more information on how to automate your finances, check out my 12-minute video where I go through the exact process with you.
Investment #4: Your (constant) education
If there’s one thing that I hope my readers have gained from my blog, it’s that you should always be in a state of curiosity. Be inquisitive. Ask questions when you don’t understand something and don’t be afraid to seek out more information through books, courses, or schooling. It’s only then that you can hope to truly live your Rich Life.
And don’t just focus on things that you think are closely related to your career. I want you to approach education laterally. You’ll be surprised at the things you’ll be able to pick up that’ll help you in life and at the office.
- Are you an investment banker? Go take an improv class and become better at public speaking (and cracking jokes with others).
- Small business owner? Take a course in another language like Spanish or French. You might be able to broaden your audience that way.
- Aspiring baker? Join that cool sci-fi writing workshop you saw online. At the very least, you’ll be able to craft solid business proposals.
Your thirst for education should be constant and voracious. I don’t care if you’re reading this in your twenties or your sixties. There’s always something new to learn that you can add to your well of knowledge to draw upon.
If you ARE in your twenties though, you have so much potential in your life to leverage — but only if you know what to invest in. So take advantage of the time machines around you and talk to older people who have been around the block a few times and know what worked out for them.
Want more lessons from THIS time machine? I have an offer for you: My Ultimate Guide to Personal Finance.
- Master your 401k: Take advantage of free money offered to you by your company…and get rich while doing it.
- Manage Roth IRAs: Start saving for retirement in a worthwhile long-term investment account.
- Automate your expenses: Take advantage of the wonderful magic of automation and make investing pain-free.