Yahoo Autos 10 Ways To Build Wealth From a Young Age
You’re young, you’re free, you’re wanting to go after ALL the things. That holiday in Greece, that exquisite new restaurant in the city, limitless concerts — you want all of this and more.
The problem? You’re also broke.
That’s probably why you’re also determined to build wealth starting young.
Find Out: How I Went From Middle Class to Upper Middle Class
Discover More: 9 Easy Ways To Grow Your Wealth in 2024
The good news? It’s more than possible to become rich — as long as you make the right money moves right now at a young age.
Below are 10 ways to help you become successful.
Earning passive income doesn't need to be difficult. You can start this week.
Invest and Harness the Power of Compound Interest
According to Abid Salahi, finance expert and co-founder of FinlyWealth, building wealth from a young age requires discipline, knowledge, and strategic action.
“One of the most impactful strategies is to harness the power of compound interest through early and consistent investing,” he said. “A 25-year-old who invests $5,000 annually with an 8% return could amass over $1.5 million by age 65, whereas starting at 35 would yield just $650,000.
“I once advised a 22-year-old recent graduate to allocate 15% of her entry-level salary to a diversified investment portfolio. Despite initial hesitation, she stayed committed. By age 30, her portfolio had grown to $50,000, giving her a significant head start on wealth accumulation.”
Explore More: Here’s the Salary Needed to Actually Take Home $100K in Every State
Prioritize Financial Education
Another crucial strategy, Salahi advised, is to prioritize financial education.
“Young adults should dedicate time to understanding basic economic concepts, investment vehicles and market dynamics,” he said.
He said this knowledge forms the foundation for informed decision making throughout their financial journey.
Kevin Huffman, owner of Kriminil Trading, recommended learning about budgeting, saving, investing, debt management and other personal finance basics.
“Read books and articles or take online courses to discover more resources about your area of interest,” Huffman said. “A financial advisor or mentor can also help you with financial planning and provide personalized advice.”
Build Good Habits Around Budgeting and Saving
“After building a good foundation of personal finance knowledge, it’s time to incorporate more useful tactics,” Huffman said.
Create a budget to track your income and expenses, and find ways to cut down on your spending.
At the same time, he recommended beginning a habit of saving money by putting some in a high-yield savings account and also investing in lower-risk options such as index funds.
He added, “Another option is building an emergency fund to protect yourself against unexpected expenses.”
Automate Your Finances
Automation is a powerful tool for wealth building.
“Setting up automatic transfers to savings and investment accounts removes spending temptation and ensures consistent progress,” Salahi explained. “By implementing this simple yet effective strategy, I’ve seen clients double their savings rate within a year.”
Develop Multiple Income Streams
According to Salahi, developing multiple income streams can accelerate wealth creation.
This might include starting a side business, freelancing or investing in rental properties. Salahi said, “One client increased his income by 40% in two years by leveraging his skills to consult part time.”
Avoid High-Interest Debt At All Costs
Avoiding high-interest debt is crucial, Salahi said.
“The average credit card interest rate is around 16%, which can quickly erode wealth,” he pointed out. “Young adults should pay off credit card balances in full each month and use debt strategically only to appreciate assets or education that increases earning potential.”
Live Below Your Means
Living below your means and avoiding lifestyle inflation as income grows can provide significant wealth-building leverage.
“The money saved can be redirected towards investments or building an emergency fund, which provides financial stability and prevents setbacks,” Salahi said.
Maximize Your Job’s 401(k)
Salahi also noted that maximizing employer benefits, particularly 401(k) matching, is an often overlooked strategy.
Salahi said, “A young professional who takes full advantage of a 6% employer match effectively receives a 6% raise directly towards retirement savings.”
Build Your Network
Network building and continuous skill development are intangible but valuable assets.
“Attending industry events, joining professional associations, and pursuing relevant certifications can lead to better job opportunities and higher earning potential over time,” Salahi said.
Consider the Lasting Impact of Your Financial Decisions
“Young adults should consider the long-term impact of major financial decisions,” Salahi cautioned. “Choosing a more affordable home or car can save thousands of dollars annually for investment. Over decades, these choices can result in a difference of hundreds of thousands in net worth.”
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This article originally appeared on GOBankingRates.com: 10 Ways To Build Wealth From a Young Age
