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How to Best Invest Your Time and Money in Your 20s

Jul 14,2021

At 22 years old, you have an entire world of possibilities ahead of you. There are so many paths you can take with your career and personal life, and it can be hard to know where to start and what to do to ensure future success. If you are wondering what you should be doing in life, let us give you a bit of guidance from people who have been there.

Learn to Pivot

To pivot means simply, to turn. You may have had a dream to hold a certain career since you were a child, but in adulthood, you may find that you are better suited for another. You may have decided long ago that you would never move from your home state, but there is an opportunity on the other side of the world that is too good to pass up. Pivoting means being flexible and able to change your mind when you are presented with new information. Being rigid and inflexible will cause problems for you later down the line, so learning to make changes when necessary is a good thing. You don't have to continue on a path simply because you have invested time in it.

Use Compound Interest to Your Advantage

One of the most important lessons to learn as a 22-year old is the magic of compound interest. This principle can either work for or against you, so it is important that you master this now. When you invest your money into an interest-bearing account, the bank pays you interest on your deposit. This in turn grows your deposit, and the bank will then pay you interest on the new, higher balance. This cycle will repeat every month until you have amassed a huge balance, just by simply making small additions. Interest is free money that the bank pays you for parking your money there. The best advantage you have when it comes to compound interest is time. The younger you start, the more you amass and the quicker you can earn a high return.

If you invest $1,000 today in an account that gains, on average, seven percent interest per year, and you never add another penny, you will have $16,000 by the time you're 62 in 40 years. If you invest $1,000 today at the same seven percent interest rate, and you add $100 a month, in 40 years, you will have amassed nearly $280,000.

If you wait until you're 32 to get started and invest the same amount, you will have only accumulated about $130,000 by the time you're 62. It's free money. Don't let it go to waste.

Compound interest also works against you when you are a debtor. If you get a loan with a five percent interest rate, the balance will continue to grow until you pay it off. This means that the longer it takes for you to repay a loan, the more you will owe. Compound interest is how some students take out a $10,000 student loan and end up paying back $40,000. Pay off any loans quickly and avoid high interest loans altogether.

Where Should I Invest My Money in my 20s?

There are many places you can invest your money in your 20s. First, you can invest in the stock market by opening up an investment account through your job. If your company does not offer an investment account or retirement plan, you can open one through a brokerage firm or your bank. Some of the major firms like TD Ameritrade, Schwab and Merrill-Lynch will assist you in opening one for a small starting fee. Some people in their 20s start their accounts with $500 or less.

The second way to invest your money is through real estate ownership. Real estate has traditionally increased in value over time, and you can make money by buying a home or commercial property and selling it later for a profit. Some people buy property to rent out on Airbnb, others buy vacant lots and rent them out for flea markets, carnivals and festivals. Think outside the box. You can buy an RV to rent to vacationers or buy cars and rent them out for weekend errands or people who want to drive for Uber.

You can also invest your money in a business. This is a bit tricker and more risky than real estate, but with a good business idea, it can also be the most lucrative. Consider opening a small bakery, or running a concession stand. You can start a business working as a graphic designer, a photographer or a math tutor. The sky is the limit when it comes to ways to invest your money in your 20s, but if you find one or two that work, you will be able to enjoy the profits for years to come.

What Should a 22-year-old be Doing in Life?

Whatever you want. This is the chance in your life to craft the life you want. There is no set path, you can forge your own. If you want to spend the next 10 years traveling the world, working online while you experience different countries, do it. If you want to settle down in a career and buy a home, then get married and have kids, do that. If you want to pursue a career as a wildlife photographer, or buy a van and live in it while traveling the United States, do that. The key is to chart your own path in life, finding what ultimately makes you happy.

How should a 22-year-old invest time? By doing what will bring her success in life. That's a pretty broad statement, and we made it intentionally. There is no one answer to how you should invest your time. It depends on what your ideal life looks like and how you want to best make use of it. Remember to invest your money well, chase your dreams and be able to pivot when necessary.

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