The 11 BEST Purchases To Make In Your 20s

The 11 BEST Purchases To Make In Your 20s

If you ask the internet what are the best purchases you should make in your 20s? you’ll see people telling you what watch you need to buy, what clothes you Should be wearing, how you should be smelling like and what car you need to be driving that way you can look like a young sophisticated professional.

But what I want to do is a little bit different and I want to talk about 11 of the best purchases you make in your 20s. That will set you up for much more wealth and much more freedom in the future, just because you use your 20s the right way and this can set you up for the rest of your life to be financially free and never have to worry about money Again.

Buy The ECONOMY

You’ve probably heard of people investing their money into the stock market, trying to find the next hot stock. Which, you know, if you want to put a little bit of money into that, I’m not going to stop you. But make sure you’re also thinking about just buying the economy.

Despite the market crashes, despite the recessions, the market has continued to grow.

The problem with trying to find the next hot stock and investing your money into individual companies is, most people don’t know when to buy, they don’t know when to sell, and they don’t know if the company that they’re investing in is actually a good investment or not.

However, if we take a look at the stock market like the S&P 500, the average historical return is 10% a year. That means our stock market, on average, has grown by around 10% a year.

Now, the S&P 500, this thing that I keep throwing around, is a term for an index, meaning a group of the 500 largest companies in the stock market. And instead of you just going to go out and find the next hot company, you can just put your money into something like the S&P 500, and now you own a piece of the 500 largest companies in the stock market.

DISCLAIMER:

Now, of course, I’ve got to give you a disclaimer. I’m not a financial adviser, I can’t tell you what to do, and I’m not telling you what to do. I’m just giving you this as a point of starting your education, that way you understand the different options that you have because, of course, investing has risks. You are never guaranteed to make money when you invest. In fact, you will probably lose money at some point.

So make sure you always do your own due diligence and never blindly trust a random guy on INTERNET. But for example, if you went on to the stock market, you went on to any stock brokerage, and you bought a share of SPY, what you’re doing now when you buy SPY is you’re buying a piece of the S&P 500 Index.

So when you buy 1 share of SPY, you’re buying a little bit of the 500 largest companies in the stock market.

if one of these 500 just companies in the stock market goes bankrupt, you’re still okay because you have 499 other companies in this fund, and then this fund will kick out the bankrupt company and put in a new company.

So it can be managed a whole lot easier on your end because you know that historically we have seen market crashes, we have seen recessions, our economy has seen market crashes and recessions pretty much every decade for the last century, but our economy has been resilient throughout this.

And now, if you just keep putting your money into something like the economy, well, now you’re owning a piece of the strongest economy in the world, and you want to hold onto it for the long term because we have seen historically that this has worked.

Does it guarantee it’ll work in the future? No. But we’ve seen through history that this has worked in the past.

Now, to show you the power of this and why it’s so important for you to start investing sooner rather than later.

Let’s assume that you invest $250 bucks a month, less than $10 a day. You do this for 40 years, and even as you make more money.

let’s assume : that you don’t invest any more than $250 a month and you get the average 10% of return, which is what I was talking about. If you do this after 40 years, your investment account is going to be worth over $1.4 million, almost $1.5 million.

But if now let’s say that you have the ability to invest even more money.

let’s assume that you can invest $1,000 a month and you do this for the next 40 years until you retire. You get the same 10% return. Now you’re going to retire with more than $5.8 million in your account because you had these 40 years to do it.

But now let’s assume that you weren’t as financially astute in your 20s.

Maybe you start in your mid-30s and now you invest, say, $1,000 a month. And the only thing that you change is you do it for 25 years instead of 40 years, but you get the same 10% return.

Now, in this instance, even though you’re investing $11,000 a month, you’re going to retire with around $1.3 million, still a lot of money but it’s nowhere near what you would have had if you would have started a little bit sooner and it’s still less than what you would have had.

if you started investing just a little bit earlier with a quarter of the amount of money. This is why how much time your money has to grow on compound is so important, which is why if you’re in your 20s, you want to start investing sooner rather than later and understand markets go up and down and continue investing through the ups and downs.

Also read : 5 Assets To Include In Your Investment Portfolio (Simple Investing For Beginners)

Buy A Rental Property

Instead of buying a home, buy a rental property.

Everybody talks about the value of buying a home in your 20s. But when you buy a home to live in, the way you make money is if you can sell this home for a profit.

Some people say if the home goes up in value, you can pull cash out. But that’s kind of a risky game because if you’re pulling cash out to buy things like cars or vacations, you’re using the money from your home to buy things that lose value.

Let’s not talk about that. People hope that you can buy a home for $400,000 and sell it for $500,000 10 years from now. But when you sell it, you’ll no longer have a home to live in.

Not to mention the fact that when you live in this home, you also have to pay for property taxes, insurance, maintenance, upgrades, and all other expenses associated with homeownership out of your pocket.

What worked well for me was buying rental properties in my 20s.

If you don’t have the money to buy a rental property now, stick with me and I’ll show you another option.

Instead of buying a home to live in where you have to pay for all the expenses out of your pocket, when you buy a rental property, you’re buying a property not to live in yourself but to rent out to somebody else.

If you do it correctly, this property will generate cash flow through rent. This rent will cover property taxes, insurance, maintenance, management fees, upgrades, and hopefully the mortgage as well.

If it’s not covering the mortgage and everything else, it’s not a good cash-flowing deal. You want to find a good deal that covers all these expenses and puts some money in your pocket as well.

So now, when you have this rental property paying you money every single month, and then that rental property grows in value, you can sell it and buy a bigger rental property.

There are a lot of tax shields that allow you to do this without paying any money in taxes. It’s called a 1031 exchange. I won’t go over that in this blog post, but it allows you to sell a property, take the money, buy a bigger rental property, and not worry about property appreciation taxes.

Of course, you get the same benefit if you buy your own home and sell it for a profit. There are a lot of tax deductions there when you sell the home for a profit as well.

However, with repairs and upgrades on the rental property being paid for through tenant rental income, you’re not paying for it out of your pocket.

You can use this rental property income to help subsidize the home you want to buy yourself. Now, if you’re saying,

“I don’t know if I have all the money to buy a rental home and then buy a home for myself,”

another thing you could consider is house hacking.

House hacking allows you to do one of 2 things.

House hacking No.1: You can buy a home to live in yourself and qualify for lower mortgage rates because it’s your primary residence.

Most mortgages allow you to move out after a year and one day, then turn the property into a rental.

House hacking No.2: Your primary residence can be a duplex, a triplex, or a quadplex. So you could buy a property where you live in 1 unit and rent out the others. This way, you start generating income for the rest of your life instead of just buying a property to live in.

When you have more money, you can buy a bigger property without worrying about the cost.

Also Read : 3 Signs The Middle Class Is Financially Screwed (And How To Fix It)

Buy A Reliable Car

The 3rd purchase you want to consider making in your 20s is a cheap but reliable car.

A good working condition car, something like a Toyota Corolla, a Toyota Camry, or a Honda Accord. Something that’s used and in good working condition that you don’t have to worry about making payments for, that you can buy outright, and you don’t have to spend a lot of money maintaining.

The reason is because what happens to so many people in their 20s is, you finally start making a decent income, and as soon as you start making that income, what do you want to do? You want to get the BMW, the Mercedes, the Jaguar, something nice that looks like you’re making good money now.

So, now what ends up happening is you drive a car that looks like this, and every time you drive by, everybody says, “Woo, nice car!” But the price for that “woo, nice car” is you’re going to be paying somewhere between $500 to $1,000 a month for this car, depending on how much money you’re making.

But let’s just assume it’s the low end, $500 a month for this car. Not to mention, now you also have to pay for premium gas, more expensive insurance, more expensive maintenance, but let’s ignore that for now and focus on this car payment.

You also have to put $8,000 down to buy this car. But now you’ve just set yourself up for years, if not decades, of car payments.

You might say,

“But Jess, what do you mean decades of car payments? I’m going to pay off my car in 5 years.”

Well, what ends up happening to a lot of people now is you pay $500 a month for 5 years, and then you finally pay off this car after paying $500 a month for years, and then you no longer have a car payment.

Now, your car is worth less than half of what you bought it for, and now it feels weird not to have a car payment.

So, you do what everybody else does, you trade it in because now when this car is 5 years older, it’s now an old car, and you want to trade it in for a newer car, and now you start the payments all over again.

So now, after those 5 years, instead of paying $500 a month, now you’re paying $650 bucks a month. You want to know why? Because inflation happens, cars are more expensive 5 years from now than they are today, and now you’ve got to pay more money. And you also make a little bit more money, so you want to have a nicer car to upgrade your lifestyle. Because now you want the massaging seats in your car.

So now you’re paying $650 bucks a month for your car, and now this happens year after year after year, decade after decade after decade.

Instead of using this money in your 20s to invest into something like the economy, which I talked about in point No. 1, or into something like a rental property, which is what I talked about in No. 2, or to something like your own business, which I haven’t even talked about, but instead of doing that, you’re using this money to invest into somebody else’s dream life, somebody else’s vacation, somebody else’s college fund. Because now you’re paying the banker, you’re paying BMW, you’re paying Mercedes, and you’re making them rich at your expense.

There’s nothing wrong with having nice cars, I just want you to be able to afford it first. I don’t want you to have to worry about the price, because if you don’t have the investments but you have the nice car, your priorities are all in the wrong place.

And this is where I want you to switch those priorities and understand, look, if you just bought a car with this $8,000 down payment, you took away this monthly mortgage because now you’re driving a used Toyota Camry, well guess what?

Now you take this $500 a month and you put this into something like the economy, a rental property, your own business, something that’s going to make you more money.

And over the course of your career, well, now this money can make you significantly richer.

We talked about this in point No. 1, this is money that can be used to make yourself rich, to pay for your kids’ college, even if you don’t have kids yet, there’s a lot of things that you can do with this additional money. But that requires you to make the sacrifice. And you’re going to say,

“But Jess, that’s easy for you to say.”

Well, yeah, it is because I’m driving around in a beat-down Toyota Solara as well, and I understand the way this works because I’ve done it myself.

Buy Protection

The 4th thing you’re going to want to buy is some protection.

As you start making money in your 20s, you’ll realize that taxes are expensive.

A big chunk of money will automatically go to Uncle Sam in the form of taxes, and this is where you want to have at least some basic protection to ensure you’re not overpaying in taxes and that you’re maximizing your deductions. This might mean getting a tax advisor.

Be smart here, if you’re making $50,000 or $60,000 a year as a W2 employee without any investments or businesses, you don’t need to spend $1,000 on a tax advisor.

Maybe a hundred bucks just to have someone review your tax return. But as you start making more money, have more diversified streams of income, and more complex income sources, or if you have more investments, that’s when you want to invest more money into a good tax advisor.

If you’re a business owner or investing in real estate, you definitely need a good tax advisor to maximize your tax breaks and deductions.

Second, as you start making money, getting married, or having a family, you also want to think about planning your estate.

Get a good estate planning attorney. Yes, even when you’re young, because no one knows what’s going to happen in life.

Protect yourself and your family by getting a will or a trust. Talk to a good estate planning attorney based on your financial situation, but start thinking about it sooner rather than later.

Third, get a good attorney to protect you, especially if you’re investing in real estate or have a business.

You don’t want to own these assets under your own name; you want protection. That means owning them through a legal entity like an LLC. Invest in getting a good attorney.

It doesn’t have to be the cheapest person, sometimes you get what you pay for. Shop around for the best value.

Also, think about life insurance, especially in your early 20s, as you start making money, getting married, or having kids.

If you’re the breadwinner of your family, consider what would happen if something were to happen to you.

Term life insurance can provide a short-term financial protection for your family in case of a tragic event. It’s relatively inexpensive compared to whole life insurance, and it ensures your family is financially protected in case of the worst-case scenario.

Time Back

The 5th thing you’re going to want to buy in your 20s as you start making money is to start buying your time back.

What you’ll realize is that time is your most valuable asset; it’s the only thing you cannot get more of. But what you can do is buy some of your time back by using your money.

The way you do this depends on what you like doing or what you don’t like doing.

If you live in a colder area where it snows, you can pay somebody to shovel your snow, mow your lawn, do your laundry, or get your groceries for you.

If you make YouTube videos, you can pay somebody to edit them for you.

So, now it’s about understanding if there are ways for you to use the income you’re generating to pay somebody else to do something you don’t like doing. This way, you can have your time back for freedom, or you can pay somebody to free up your time so you can earn more money.

For example, if your time is worth $30 an hour and you can pay somebody $20 an hour to mow your lawn, it makes sense to delegate that task so you can focus on earning $30 an hour.

You need to figure out what tasks are worth buying your time back for and when it’s the right time for you to do this.

When you’re starting a business, you might not have the money or resources to hire people initially. But as you start making money, you need to determine when it’s the right time for you to start delegating some of these tasks so you can have more freedom or more time to earn more money.

Books

No.6  is for you to use your money to go out and buy some books.

If you want to get an MBA-level education without paying the price tag of an MBA, here’s what you do: get 5 books on personal development, 5 books on money management and investing, 5 books on starting a business if you’re an entrepreneur, or 5  books on growing in your career if you’re not an entrepreneur.

Additionally, get 5 books on leadership, and then get 5  books on biographies from successful people you admire. Once you have these 25 books, read them.

Once you’ve read these books, start applying the knowledge you’ve learned. I guarantee you, if you read these 25 books over the next 12 months, you will be in a completely different mindset and have a completely different skill set, setting you up for different levels of success in the rest of your life.

If you start this in your 20s, not only does your money compound, but your knowledge compounds as well, allowing you to learn more and live a much better and more fulfilling life.

Also read : How To Get Rich In The New World Economy?

Fitness

No.7 is to buy something to advance your health.

One of the things I like to talk about is if you want to live a happy and fulfilling life, you have to live a fit life.

The way you live a fit life is by understanding the 4 different fitnesses in your life. I call this my QuadFit theory, where I believe there are 4 different fitnesses in life: physical fitness, mental fitness, spiritual fitness, and financial fitness.

Invest in these different types of fitnesses. If you’re physically unhealthy, take care of it sooner rather than later. Your body is the only vehicle you get, so invest in it. Get a gym membership, a nutritional coach, a trainer—get help to be more physically fit. If you’re mentally unfit, surrounded by toxic people, depressed, or anxious, invest in this. Get a therapist, a consultant—seek help for your mental health.

On your spiritual fitness, this doesn’t have to be religious; it’s about your fulfillment. What’s your sense of purpose? What’s the reason for getting up every single morning? Especially as you start to make more money, this becomes so much more important. If you need help with this, invest in a coach.

Similarly, with your financial fitness, invest in your financial well-being. Read books, take classes, invest time into financial health and your financial education. Most of this stuff are things we never learned in school. Learn how to invest your money, live below your means, and earn more money. Invest in your financial education.

How Much Money You Need To Afford A $500,000 Home?

Wedding Ring

No.8 is to buy a wedding ring.

Let me give you a little bit of background: I got married in my late 20s, and as someone who grew up in a traditional Indian household, Indian weddings are expensive. I knew early on that I wanted to pay for my wedding, and that mindset helped me start planning and saving money for things like my wedding ring before I even met my wife.

If you know you want to get married, you also know that getting married comes with expenses like a wedding and a wedding ring. Even if you haven’t met your partner yet, start saving and planning for it sooner rather than later. You don’t want to find yourself unable to afford the wedding you dream of or, worse, going into debt for it.

Start planning and saving early, especially if you’re young, so you can fund these expenses when the time comes. And let me add this: a good partner is also a very good investment. They’ll help you achieve your goals, including your financial ones.

Talk to your partner about working together to become wealthy and understand how to communicate effectively with them based on their thinking and talking patterns.

If you’re looking for a good book on this, I recommend

“Men Are from Mars, Women Are from Venus,”

which discusses the differences in how men and women think and communicate.

Things That Touch The Ground

No. 9 – spend some money on what touches the ground.

Somebody told me this a while back, and it stuck with me. Things that touch the ground include your shoes, your tires, and your bed. These are 3 places where it makes sense for you to invest some money.

Talking about shoes first, I used to run my shoes into the ground. Before that, I used to be really into shoes, but my parents didn’t want to buy me a $100 pair of Jordans.

So, I used to buy $20 or $25 fake Jordans from China. Then, I realized I didn’t want to keep spending money on shoes, so I ran my shoes into the ground where I had holes and duct-taped them.

Then, I started learning about investing money into things that touch the ground, and I started buying nicer shoes.

Now, I love walking, and investing in nicer shoes has made a huge difference. I used to buy shoes for years and never change them, but now I buy multiple pairs a year because I put a lot of miles on them.

Same with my bed—I spent a lot of money on the bed my wife and I sleep on, and it’s worth it for a good night’s sleep. And when it comes to tires, especially in colder states like Detroit where I’m from, having good tires is crucial for safety.

So, invest in good tires, a good bed, and a good pair of shoes because they can improve different aspects of your life.

Invest In Travel

No.10 – invest in travel strategically.

For most of my life, I was never a big traveler. I went to India pretty often as a kid because I had family there, and once in a while, I’d go to Cancun or drive to Toronto. But it wasn’t until my late 20s that I started traveling more, mainly because I was invited to travel for work.

Initially, I was hesitant to spend money on travel, but when I realized I could make it a business expense, it made more sense.

Traveling allowed me to meet more people and see different business opportunities that I wouldn’t have noticed from my office.

While I’m not a fan of the traditional conference networking scene, there is value in attending events where you can meet like-minded individuals and learn from different perspectives.

Additionally, experiencing different cultures, even within the same country, has been eye-opening for me.

For example, spending time in SoCal, San Diego, and LA showed me how business is done differently compared to my hometown of Detroit. Similarly, experiencing Manhattan’s culture was vastly different from LA or Detroit.

Understanding these cultural and business differences has not only helped me make more money but also broadened my perspective on financial education.

Different regions have varying approaches to money, and this insight has been invaluable for our company, Briefs Media.

So, consider investing in travel to expand your horizons, meet new people, and gain valuable insights into different cultures and business practices.

Practical Purchases

No.11 – make some practical purchases.

As you start your wealth journey, you’ll realize that while some people frown upon spending money at Starbucks or splurging on extra guac, the real issue with finances often lies in overall financial mismanagement.

There’s a time for indulging in luxuries like Starbucks or extra guac, and there are times when it’s more practical to make things at home.

For daily consumption, especially in the early stages of building wealth, consider making items like avocado toast or tea at home to save money.

Once you’re more financially stable, feel free to indulge in whatever you like, whether it’s Starbucks or extra guac. Just ensure that you can afford these luxuries first.

A funny story my parents shared recently illustrates this point. They visited an Indian tea house for the first time in America, expecting to pay a reasonable price for their beloved chai.

However, they were surprised when they received only 1 cup of tea and 1 dessert for $10, thinking it was expensive. It turned out they had only been charged for 1 cup of tea and 1 dessert, not 2, making it even more expensive than they initially thought.

So, while it’s sometimes more practical to make things at home, understand when it’s appropriate to splurge.

Ultimately, becoming wealthy means owning assets like investments, businesses, stocks, or rental real estate that can sustain your desired lifestyle.

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