When considering assets to buy in your 20s, it’s important to realize what’s at stake.

Make smart financial moves in your 20s, you make life much easier. You’ll have more options, less stress, and get the power of compound interest on your side.

What type of assets would fall under smart financial moves?

You can separate them into two categories:

    1. Things
    2. Skills

Your ability to build wealth is determined by the gap between your income and expenses. When you can increase your income and decrease your expenses you build wealth fast.

How does one go about doing that?

By acquiring the right assets and learning the right skills.

What Is An Asset?

The dictionary definition of an asset is, ” a useful or valuable thing, person, or quality. ”

So, when considering assets to buy in your 20s, the question we’re trying to answer is,

“What things or skills can I acquire, which will have the greatest positive long-term impact on my quality of life?”

Let’s start with things…

Assets To Buy In Your 20s: Things

What things should you be focusing on acquiring in your 20s?

Here’s my take on the best assets to acquire in your 20s to maximize your quality of life.

# 1) A Life Free of High Interest Debt

Compound interest will either work for or against you. If you continue to carry high interest debt, it makes it impossible to get ahead. Get rid of it as fast as you can.

A great step towards eliminating high interest debt in your 20s is to refinance your student loans and get aggressive to paying them off

 

# 2) Best Investment in Your 20s

If your employer has a 401(k) plan and offers an employee match, take advantage. It’s a guaranteed rate of return, sometimes upwards of 50%.

Very few investments can offer this.

It’s also important to consider a IRA. With a low-cost index fund strategy, with a company Vanguard or Betterment, you allow compound interest to start working for you.

If you’ve maxed out your contributions to your 401(k) and IRA, you should think about utilizing a Health Savings Account, which offers up to $3,500 per year in tax-advantaged saving and investing. HSAs come with a trifecta of valuable tax benefits, which you can learn more about in my review of Lively, a free online HSA provider.

 

# 3) An Emergency Fund

Having three to six months of expenses in cash is a very valuable thing to have. Things will happen. Cars need repairing. Jobs are lost.

A three month emergency fund makes the inevitable rough patches–not so bad.

# 4) A Financial Plan

Eliminating high interest debt, taking advantage of your employer match, and an emergency fund are the first few steps to getting your finances in order.

What’s next?

It depends on what’s important to you.

Paying off student loans may be a high priority. Same as saving for a down payment on a home. For some, setting aside money to travel or for a wedding.

What’s important is you need to know your priorities and set financial goals.

Not sure how?

Below is a free workbook on how to set financial goals.

Then, read a few books on personal finance. Here are a few of my favorite on personal finance for those in their 20s.

Want to learn investing? Here are my favorite books on investing for young adults.

Assets To Buy In Your 20s: Skills

Skills can be a lot more valuable than things.

What skills should you be looking to acquire in your 20s?

Here’s 5 to consider.

# 1) Consider Post Graduate Options

The younger you are, the more a post graduate degree makes financial sense.

The longer you have a degree, the longer you can earn a higher salary from that degree.

# 2) Experiences

We tend to only add responsibilities to our already busy lives.

Whether it’s a family, a mortgage, or a more demanding career. Life tends to get more complex.

Take advantage of the limited responsibilities you have.

Travel, learn new skills, meet new people, move to a new part of the country, work for a startup, work for a big corporation.

Challenge the beliefs you’ve held about how you were going to live your life.

It gets harder and harder to do so.

# 3) Learn to Interview

One of the highest leverage skills in your career is learning how to interview.

This overlooked skill determines much of what your paid when starting a new job. Yet, few tend to view interviewing as a skill to develop. For those who spend  time increasing their interviewing skills, there are disproportionate rewards.

Earning a higher salary, working for your desired employer are some of the benefits.

You can also take more risks. If you know you can find a job in 30 days, taking the risk to start a business is less risky.

Consider interviewing a skill to master.

# 4) Understand How Your Credit Score Works

Understanding how to maximize your credit score is another skill with disproportionate rewards.

A few hours learning the ins and outs of managing your credit, can save you tens of thousands over your lifetime.

A lower mortgage rate and paying less on home and auto insurance are some of the benefits to having a high credit score.

# 5) Negotiating

Negotiating is yet another skill with disproportionate rewards.

Consider the ROI on spending a few hours preparing to ask for a raise from your employer. If you spent ten hours preparing, which resulted in a $5,000 raise, that time was worth $500 an hour.

This same skill can save you tens of thousands when buying or selling a home.

Beyond asking for a raise and buying your home, negotiation is a valuable career skill. Since few people take the time to understand negotiation, it’s extremely valuable.

There are very few higher per hour skills in life then learning to negotiate.

Some of my favorite books on the subject are:

# 6) Your Health

From a risk/reward perspective, developing healthy habits is one of the smartest skills to acquire.

On a daily basis, you’ll have more energy and better focus.

Long-term you reduce your risk from serious illness. Saving time, money, and increasing the quality of your life.

Conclusion: Assets To Buy In Your 20s

Your 20s is a tremendous time to get ahead.

It’s also a time when bad habits can set you back.

Focus on the ten most important things and skills above, you set yourself up to live a rich, happy, and fulfilling life.

 

The 10 smartest financial moves millennials must make before turning 30