how to become wealthy in your 20s starting from scratch

If you are in your 20s, you can start from scratch and make the right money moves to reach financial independence early on. Becoming wealthy at an early age has been done by savvy savers over and over.

You can be the guy that achieves financial independence early in life, or you can be the guy working for the man for the rest of your life. The difference boils down to how you invest your time and hard-earned money in your twenties.

Can you even grow your wealth in your 20s?

wealthy youngsters 20s

Creating wealth in your teenage years and even in your 20s is achievable. Instead of spending your finances on material stuff that wears out, you can put that money to work for you.

Most self-made millionaires started from scratch in their 20s. Just look at Bill Gates, Mark Zuckerberg, and Steve Jobs.

They all started in their 20s with nothing to their name. Copy their good habits as a Gen Z generation or Millennials. This is the same thing I saw when I trained rich people.

Here, we list some great ideas to build the proper financial foundation and grow your wealth.

11 ways to build wealth in your 20s starting from nothing

1. Learn to budget

Budgeting is the one skill that you need to learn to become wealthy. It is a subject you don’t learn in school, so you have to teach it to yourself.

When you budget, you allocate a certain amount to each expense category. In our household, we have budgets for dining out, vacations, clothes, and even buying stuff we don’t need.

Also read: Five Simple Budgeting Techniques.

You can automate your budgeting by using an app. We’ve used these apps:

  • Mint
  • Personal Capital
  • You need a budget

Alternatively, you can also budget manually by using the cash envelope system.

Most importantly, stick to your budget. It is easy to overlook untracked expenses, they become money leaks to your financial pipeline.

Once you’ve learned how to budget, the next step is to keep your expenses low.

2. Avoid lifestyle inflation

avoid inflation

Accumulating wealth involves keeping your costs down while increasing your income.

Lifestyle inflation happens when you start making more money and spending more simultaneously. As a result, you end up in the same financial place you started.

Spending more after being promoted or starting a side hustle that props up your monthly earnings is easy. It almost feels like you have to reward yourself for all the extra work.

Spending more of your extra money instead of investing it in the stock market or an income-producing property will only lead to financial ruin.

So, how do you avoid lifestyle inflation?

You can avoid it by applying the principle of budgeting shown in subheading one.

After you learn to budget and avoid lifestyle inflation, the next thing to do is:

3. Create an emergency fund

emergency fund screenshot

Creating an emergency fund early in your 20s will prepare you to deal with any unforeseen circumstances.

In contrast, if you do not have enough savings to cover an emergency, you will have to resort to credit card debt or ask for help from your parents. Neither are good options.

Examples of emergency expenses:

  • Car accident
  • Unemployment
  • Sickness
  • Death in the family
  • Expensive car repairs

Wealthy people know that their time and money are valuable. An emergency fund will help you stay on track with your financial goals.

Must Read: How To Save For An Emergency Fund Properly

4. Become financially savvy

Teacher mentoring a woman screenshot

After creating an emergency fund, you must learn what to do with your money. Keeping it under the mattress is not a good option (unless it’s a small amount, like an emergency fund).

The best way to become smart financially, by reading books and following personal finance websites like the one you’re reading now.

Find people with personal experience on the topic and practice what they preach.

Another way to become competent in your twenties or thirties is to hang out with financially savvy people. Connect with friends or colleagues in your network or listen to podcasts by the mentor you admire.

5. Build your credit score

Everyone knows that having a good credit score is essential, but most people don’t know why.

Having a high credit score allows you to borrow money with lower interest rates. Why do you need to borrow money?

Two reasons: a car and a house.

Buying your first house will be your most significant expense. Having a high credit score will help you get a loan with a lower interest rate. Even a quarter of a percent translates into tens of thousands in interest.

Start building your credit score early by getting approved for the right credit cards and paying the balance monthly. Avoid paying interest on your credit cards.

You’ll be building wealth in the short term.

6. Create multiple income sources

The average millionaire has seven sources of income. Millionaires start with one primary source of income and then continue building, so it is crucial to work in your twenties to acquire in-demand skills.

If you’re in college, there are plenty of ways of making extra money, even from your couch.. Apps like Doordash and Uber Eats provide great money-making opportunities.

Websites like Udemy, are great for learning new in-demand skills if you already have a job and need a side hustle. Use your skills to do freelance work in places like Fiverr and Upwork.

Also read: 18 Best Part-Time Jobs That Are Fun To Do

As a young person, leverage your energy to earn more. Instead of hitting parties and gaining almost nothing from it, be the person that builds their wealth and invests properly.

Another great benefit of creating an extra income source is that you can relax knowing that you have a backup plan.

You are not tied to one employer and worried they’ll fire you one day. If that day comes, you’re prepared.

7. Change employers


People in their 20s sell themselves short. Employers take advantage of this weakness.

If you have been in your current job for more than a year. Likely, you’re not getting paid what you’re worth. Think about it.

In one year, you acquired skills and knowledge you previously did not have. Your new knowledge makes you more valuable. As a result, if you change to a new job, the chances of getting paid more are high.

Gen-Z and millennials, you need to understand your worth, to increase your wealth. Be prepared to switch employers for better-paying ones.

Being the best in your team can help.

Working hard and getting your superiors’ attention helps place you in-line for a promotion. But, what if they don’t want to promote you?

Switch jobs.

There will always be new companies willing to pay your true worth.

8. Saving for retirement

Retirement is a word that is rarely heard by young people but exists. Early retirement can be a dream come true. It is wise to research what many don’t talk about much when it comes to early retirement, like there are things to look out for or to be aware of.. Do you know who else thought they would never reach retirement age?

Every retired person that now lives.

In the blink of an eye, you’re thirty. A few more blinks, and you’re in the retirement bracket. Maxing out your retirement will ensure you’re prepared when the time comes. If you have an employer that does 401k matching, take advantage of it.

In 2022, the IRS allows a maximum contribution of $20,500 to a company-sponsored 401k. The money that you put into this pot is tax-free for now. You only pay taxes when you withdraw the money in retirement.

The money in your 401k is invested by the banks and is earning compound interest.

In addition to a 401k, put money aside for a Roth IRA, another type of retirement account. Depending on how much you save every month, you can retire as a millionaire.

9. Evaluate expenses once every six months

If you are in your twenties, you have a chance of avoiding the most significant mistake: excessive debt. The average American has $90,460 in debt. When you add the interest people pay on this amount, the figures rise even higher.

Similar to lifestyle inflation, it is good to determine which new expenses you have acquired in the past few months. Examples of expenses that fly under the radar:

  • Increase your monthly cellphone bill.
  • Apps subscriptions you no longer need.
  • Streaming subscriptions you rarely use.
  • Eating out more often because you stopped meal prepping.
  • Unused gym memberships.
  • Raises on your car insurance.

Evaluating your finances every six months can help you spot price hikes and do something. The best choice is to eliminate them.

In other cases ( insurance), you must shop for a better deal. There are always insurance companies willing to give you a better deal.

Must Read: How To Lower Your Cost Of Living.

10. Be frugal without being cheap

Make no mistake; wealthy people are frugal.

Frugality is the quality that connects most millionaires. So if you want to build wealth in your 20s, you must become frugal. But how frugal should you be?

It helps if you reduce expenses in all your budget categories to the most efficient level. You got it right when you feel somewhat restricted on your budget, but not to the point that affects your life.

If you overdo it, you end up being a cheapskate.

Related: What Does It Mean To Live Frugally?

You know you are a cheapskate when you must sacrifice the quality of life to save a bit of money. Example: you shop at five different stores to save a few dollars on every item.

That’s a lot of time wasted. Your time could be used to read more articles on this website and put it into practice. Like starting a side hustle.

Related: Semi-passive income ideas for beginners. Side hustles with medium time commitment

In addition, you don’t have to be frugal forever.

Once you have attained enough wealth, you can stop being frugal if you want to. Experience says you’ll continue practicing frugality.

11. Avoid credit card debt

Credit card debt is the worst, and slows down your financial goals.

It is ok to use credit cards to gain reward points that can be redeemed for cash or vacations.

It is not ok to use credit cards, if you cannot pay the entire balance every month.

The average American carries$6,914 in credit card debt. At an average interest rate of 20%, a burden on the back of your financial goals.

Avoid carrying a balance at the end of the month. Apply this practice early, it becomes a habit, and you’ll condition yourself to be financially savvy.

Building wealth early is the key to financial freedom

Creating wealth is a collection of habits you acquire in your twenties or even earlier. Program yourself to make the right financial decisions when you are young.

It saddens me to see older folks working at my local grocery store.

I wonder what kind of job they had. What did they do with their money? Did they ever think they would be working even after retirement?

You can avoid regret by building a foundation, a wealth platform that you build your empire. Remember that most millionaires are self-made.

They did this by applying the principles we write in this blog. I have seen this first hand from training wealthy people and asking them questions.

Most people waste their 20s, and look back with regret for all the things they could have done.

On the other hand, there will be very few people who will achieve financial freedom early on in their twenties or thirties. Will you be one of them?

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