Don’t Let Life Slap You In The Face: How To Build Wealth In Your 20s

how to build wealth in your 20s

If you are in your 20s and reading this, let me promise you one thing. 

At some point in the future, there will come a point in your life where you will think to yourself:

“Ahh, if only I knew / did / avoided [insert one] this earlier”

That thought may even be accompanied on a slap on the forehead.  The force of the aforementioned slap will likely correlate with the magnitude of whatever mistake or oversight you are trying to fix.

In other words, this:

don't punch yourself - find out how to build wealth in your 20s instead

Life can have a funny way of being the best teacher there is – but only for those lessons to come way too late to make a difference.

It’s kind of like going to primary school in your 70s.  Could be fun but probably useless by then. 

In many areas of our life, society sets out certain parameters that can help us prevent doing serious damage to ourselves.  Hard drugs are illegal.  Alcohol and tobacco are expensive.  We have speed limits in place.

Like them or not, all of the things above are there to help you make it to your 30s and 40s in one piece, with your brain and liver still functioning. 

Unfortunately, the same doesn’t apply to saving, investing and building wealth.  Leaving mandatory workplace pensions aside, we largely stumble through the first decade of our working lives, vaguely aware of the need to look after our financial situation but never really getting to it.  

And then, typically in our 30s or 40s, we finally realize the scale of the missed opportunity. 

Cue the slap in the head, probably one of the stronger ones. 

So if you are in your 20s and looking to make the kinds of financial decisions that help you build wealth AND avoid self-harm in the future, please read on. 

Six Rules For Building Wealth In Your 20s

1. Invest In Yourself Early On

Do you know what your biggest income-producing asset is?  It’s you.

Nothing will have a greater impact on your ability to live a rewarding life full of health and wealth than the combination of your education, skills and network.  

And while learning can and should be a lifelong process, the sooner you can start putting your knowledge and abilities to use, the more time you have to extract a return on them.

What that means in practice is that you need to finish your education as early as possible.  If you want to do an advanced degree, don’t wait too long.

I graduated from my MBA program when I was 31.  While there were good reasons for it (more on that below), I often wish I got it done two or three years earlier. 

Having that extra time would be invaluable when it came to tackling the student debt I had accumulated and surviving the pressures of an investment banking job. 

So don’t delay.  The earlier you finish up your education, the faster you can start putting your human capital to work. 

2. Become A Money Expert

One of the few fundamental truths in life is that people who don’t understand money rarely get wealthy.

The good news is that you don’t need to be a genius to be wealthy. 

As a matter of fact, geniuses rarely get wealthy as they tend to overintellectualize things all the time.  Lucky for the rest of us!

You do, however, need to have a solid understanding of the basic principles of growing your net worth:

  • Budgeting, tracking your expenses and spending less than you make
  • Basic principles of investing: the concept of compound interest, the relationship between risk and return and the advantages of passive investing over active money management
  • The concept of inflation and the danger it poses to your purchasing power over time
  • Differences between the key various asset classes (cash, bonds, stocks, real estate)
  • The various wealth-building tools at your disposal
  • The basics of taxation and tax-efficient investing

3. Put YOUR Oxygen Mask On First

As you enter the workforce and finally start making money, things change.

You are finally in a position to help out your parents and relatives, lend a hand to your friends and contribute to charitable causes.

While all of the above are worthwhile endeavors, the most important thing you can do is get yourself on solid financial footing first before helping others out.  

There’s nothing egoistical about it.  It’s just that you can’t really help others if you fall down the first time life kicks you. 

Besides, when it comes to helping others the gift of time is often much more valuable than money. 

So pay off your debt and establish an emergency fund before you do anything else.

4. Keep Your Expenses Low

When you are in your 20s, you often have little money, limited earning power and very few tangible assets.

However, you’ve got absolute loads of the most important asset there is.


Being in your 20s means that the lever you have to realize investment gains over time is as long as it will ever be. 

Leverage is everything

Leverage is everything – just make sure you apply it the right way

And the best way to make use of it is to reframe your thinking about spending money.

For example, assuming a 7% investment return, every £10 you save and invest today will turn into £107 in 35 years.

So that extra pint in a pub really costs £53.50 and not £5.

The £600 weekend city break?  That’s £6,406. 

How about spending an extra £300/month on rent because you don’t want to live with your parents or roommates?  That will actually be £3,200/month, please.

5. Start Investing As Early As You Can

Saving money is important.  You know what’s even more important?

Putting it to work for you. 

Yes, Brexit.  Yes, Trump.  Yes, China, Russia, Iran, my-brother-in-law-thinks-it’s-a-bad-idea, trade wars yadda yadda yadda.

None of this matters when you have a long time horizon.  Take advantage of it by starting to invest now.

Contribute to your company’s workplace pension.  Build a passive stock market portfolio.  Get on the housing ladder, even if it means buying a tiny place in the dodgiest part of town. 

Don’t have money to invest?  Get a part-time job or a side hustle. 

In other words, please don’t be a silent witness while the market does this:

Long Term S&P performance

6. Take More Shots

When I was three years into my first job, I took a leave to start a business.   

I then spent a year working 100 hours/week trying to get it off the ground.  Unfortunately, it never got enough traction and I had to fold. 

Devastated, I went back to work for my old employer.  More than a few people sniggered.

A year later, me and two of my friends from work were applying for MBA programs.  We all had the top 5 US MBA programs in our sights.

I was the only one to get in.  Later, the school’s admission officer told me that it was my failed business experience that made all the difference. 

The committee thought that my profile and application stood out from all the other people who never took a risk.

The life lesson here is:  if you want a guaranteed way to start scoring more goals, you need to take more shots. 

Whether it’s pushing for a promotion, changing employers for a pay increase or starting a business – its probably worth it.

The worst thing that will happen to you is you will fail. 

Yes, losing sucks.  But guess what?  You are young enough to absorb the impact and move on.  And the experience you’ve gained will likely continue to benefit you for years and decades to come.   

Remember – You Are Already Rich

There are few sure things in life.  I can’t predict the future any better than the next guy. 

Do take my word for it – you will never have the same amount of health, energy and youthful looks as you do today.

Remember that – because life has a habit of sneaking up on you. 

The other day, I woke up to notice the first strands of silver in my hair.  Climbing four flights of stairs gets tougher on your knees all of a sudden. 

And while it may seem counterintuitive to you now, come 9 pm on a Friday night you often feel like curling up with a book as opposed to hitting the pub with your friends.

Remember – your 20s is a truly special time. 

Follow the rules above.  Enjoy it.  Make the most of it. 

PS:  If you are not in your 20s anymore, don’t despair!  Click here instead.

About Banker On FIRE

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Banker On FIRE is a London-based M&A (mergers and acquisitions) investment banker.  I am passionate about capital markets, behavioural economics, financial independence and living the best life possible.

Find out more about me and this blog here.

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