When you’re in your 20s and 30s, building wealth doesn’t always feel like a first priority. You’re wrapping up your education, dealing with a mountain of student loans, and pursuing more immediate goals – like getting married, starting a family, kicking off your career, and purchasing a home.
But if you start working toward building wealth now, you’re setting yourself up for long-term success. By prioritizing saving, and other wealth-building strategies, you’re buying yourself more financial options in the future. Let’s talk about how you can start building wealth at this stage of your life.
Invest In Yourself
Investing in yourself may sound like a counterintuitive way to build your wealth because investing in yourself can cost money. Let’s be honest, higher education isn’t inexpensive!
However, when you take on loans or student debt, it’s important to project what your income will be when you graduate with an elevated degree and level of experience. Your future income should be higher than what you’re planning to pay in interest over the life of your loans. Plus, with a higher income, you’ll be better able to knock out your student debt and move toward your other lifestyle goals more quickly.
It’s also important to look at the emotional side of debt. What does higher education mean for your free time? How will it affect your family? These are all things to consider when thinking of pursuing a degree.
Not interested in pursuing additional degrees? Investing in yourself doesn’t have to look like going to law school, or pursuing a Ph.D. There are so many other ways that you can elevate yourself, and add to your future net worth:
- Look into industry-specific certifications that are low-cost, but high-impact when you’re building your resume
- Take on extra responsibilities or projects at work to expand your experience
- Volunteer for community or work groups/committees to network with
Build Good Savings Habits
This may sound obvious – but the more you save now, the more money you’ll have tucked away in a nest egg for the future. When you’re building a savings plan, make sure you’re being intentional about it. Saving for the sake of saving won’t motivate you to keep moving toward your goals.
Instead, focus on setting clear lifestyle goals, and decide how your savings will impact them. You can think about how you want your life to look over the next several decades. You can also think about the type of impact you want to make through your life and your career, and how your savings can help you get there. Specific savings goals are the best way to grow your wealth and build toward a lifestyle you love.
Plus, once you know why you’re saving, you’re able to build a strategy that lines up with your goals. For example, you might leverage high-yield savings, CDs, or money market accounts for high-cost, short-term goals, like buying a home or a car. Alternatively, if you want to retire early, you might double down on retirement saving, and even go so far as to fully fund both your workplace account and a separate IRA. When you know your “why” you free up more options for achieving your goals.
Pay Off Debt
When it comes to growing wealth, people don’t usually think about reducing their amount of total debt, but your debt has a big impact on your net worth. The more debt you deal with, the lower your wealth will be. If you get stuck repaying an endless amount of student loan and consumer debt, you’re also robbing yourself of the chance to save more for lifestyle goals that actually move you toward your dreams.
When you’re thinking about paying off your debt, there are two ways to tackle it:
- A debt avalanche.
- A debt snowball.
The debt avalanche means that you start by repaying your highest-interest debt first, and then “avalanche” each payment that you free up from paid-off debts into the next-highest-interest debt. A debt snowball means that you start by paying off your smallest loan, and “snowball” the payment amount from that loan into the next one once it’s paid off.
You can try either of these strategies, or create a combination of the two that motivates you to stay on track.
At Deerfield, we love working with clients not just to help grow their wealth, but to connect their wealth to their goals, and the different ways they want to make an impact. Want to learn more? Contact us today!