My advice to a 20 something investor…

Start doing it. Seriously dude. You aren’t getting any younger. I don’t need to bore you with the specifics of compound interest as I’ve done that many times before. Instead I need to give you a Personal Finance Pimp Slap across the face and beat some darn sense in to you. You have to start investing in your future…before your future is here.

Look, I don’t even care what you invest in, just so long as you form the habit of doing it. Maybe you think America is doomed to failure, invest in Kazakhstan. Or perhaps you want to invest in a specific companies stock…go for it (although I never would).

“But Ninja, I don’t have the ability to invest right now, I’m broke.’ Cry me a river, then go drown in it. Or better yet, go input your annual income in to this calculator and then tell me you’re broke.

Plus, who said ‘investing’ meant strictly in the stock market? Maybe you need to invest in paying down your debt more aggressively, or perhaps investing in yourself by reading a ‘self-help’ book or even exercising more.

You may subscribe to the belief “Tomorrow isn’t promised” and as a result live slightly more care free, but I’m willing to bet FOR YOU, tomorrow IS gonna come. So don’t be an idiot and  start investing.

I wont tell you how to go about doing it, but here is the most recommended practice…

  • Contribute to your 401K, whatever your employer will match, usually around 5% (if you get no match proceed to step 2).
  • If possible, max out your Roth IRA ($5,000)
  • If you still have extra cash, go back to your 401K andcontribute ( up to $16,500)
  • And if you still have extra cash, take me out to dinner.

Investing doesn’t have to be hard, but it does have to happen. If you’re a 20-something reader of PDITF, and you aren’t investing in your future, do me a favor and click this link.

How old were you when you first invested? How old were you when you seriously/consistently started investing? If you aren’t, what’s holding you back (debt, medical issues, stupidity)? How simple (or complex) do you get with your investments?

13 thoughts on “My advice to a 20 something investor…”

  1. I was lucky to have a lot of older people who taught me to save while I was young. I got out of college in 96 and the previous couple of decades were nuts in terms of stock market returns. Pretty much everyone jumped on the bandwagon then and was telling you you were crazy if you did anything more conservative.

    I’m not sure if people would give a new graduating class the same advice (pour money into the stock market). I still would tell any new grad:

    Keep living like a college student and pay off student loan and other debt as fast as possible.

    Save in tax advantaged retirement accounts.

    It takes most a few years to do the debt thing, by then you may have a better idea of what to do after debt is payed off.

    I actually had more than one person tell me not to rush to pay off my student loans because they have a lot of flexibility in terms of deferrment, etc. I thought this advise was nuts because you have the most flexibility when they’re gone. I hated debt and my mom never had any..none, so it was a hard thing for me to be okay with.

  2. I started investing in my company held pension plan at 21 yrs old. I started contributing to RRSP’s at around 24 years old – about $500-1000/yr to get a some tax relief (as opposed to saving for my future). I started contributing to RRSP’s in larger amounts at 43 years old. I have a good sized pension plan at this point due to 23+ years of contributing in a employer matched plan – now I just need to top up those RRSP’s and we should be all set for retirement in the next 10-15 years!

  3. My husband and I both started investing in our 401k with our first paycheck out of college. That is the one piece of advice I try to pound into every graduate’s head. Put money away immediately before you ever get used to having it.

  4. I opened a Roth IRA when I graduated from college; I was about 23. I’m not able to contribute to it right now because we have debt we’re paying off, but I’m hoping that we’ll be back to contributing in about two years when the debt is gone.

  5. Unfortunately my husband and i are unable to invest money into retirement at this time since we have pretty much no income (my husbands a full time graduate student with 70 plus hours of work and I have a part time job to try to bring in extra cash while we live of loans and wait for him to graduate and get a job) i have a 401k from an old employee that is sitting there with the money I had put in it when I worked for them and my husband has IRA that doesn’t have much in it, but we are ready to start that investing when he graduates and we both get full time jobs.

    We are just trying to figure out, when we do start working full time again, how much go towards loans and to our IRA? We want to pay off loans quickly, but at the same time I know that there can be a huge difference in your retirement if you start aggressively putting away money at 25 vs 30.

  6. I teach in VA, and they have a pension plan of sorts for us. It isn’t fantastical though, so in addition to their retirement plan I aim to start a Roth before my 25th birthday (I’m 24 right now). We spent my whole first year teaching salary paying down my student loans. I only owe $16,000 now (a whole heck of a lot less than I did last August!!), and I will be debt free by December. It has been hard to stick to this plan though because all our friends most think we are ridiculously broke or bad with money. We have to constantly tell them “no, we can’t do xyz because we don’t have the money right now.” As for what we invest in, I’m planning to invest in mutual funds. Weeeeeeeeeeeeeeeee!

  7. I had my own savings account since I turned 6. I started investing in something other than savings when I was 22 and got my first job…woot for my 401(k)! I found out about Roth IRA’s when I was 24 or 25. I invest in target date mutual funds with my 401(k) and the Roth IRA, but we also invest in individual high dividend stocks with an additional $2500-$5000 a year.

  8. I was in my early 20s when I started “investing” in the late 90s. I diligently contributed to my 401k and IRA throughout the past decade plus. What do I have to show for it? Depending on the month, either a flat or negative return on my investments.

    If I could do it over again, I would contribute the minimum amount to my 401k necessary to get the employer match (free money), and then I would save the remainder in a nonretirement cash account in order to avoid borrowing money. This means I would have paid for everything in cash — home, cars, etc. In hindsight, the absence of debt would have made a far more more positive impact on my finances than having cash locked up in long-term (retirement) accounts without positive growth.

    I agree with you that one can never start “saving” early enough. I’m still not sold on the “investing” part yet, though.

    • I thought I was the only one that lost money investing in the stock market. So many people and companies tell you to put money into an IRA aka stock market aka Ponzi scheme. I’m just like you now, pay off debt and start a 360 month emergency fund aka retirement.

  9. 21 years old, and I don’t have anything invested for retirement. It’s really annoying (especially since I know I could probably do really well if I invested a ton of money right now — the market is still in the dumps, and it’ll grow insanely in the next 40 years!) but I really don’t have much of a choice. I haven’t earned much money until recently, and I’m still earning very little. (Maybe 1200 a month, and that’s during the summer) I’m still in school, and it’ll be about a year and a half before I graduate, so it’ll still be awhile. It kind of kills me, but I’m having to save as much as possible to defray school costs as much as I can. (I’m still having to take out some loans, but I’m pretty confident I can keep it all beneath 10k) I’m just kicking myself for not trying harder to get a job when I was younger, so I could have saved more for this earlier.

    Ah well. I certainly plan on investing as soon as I’m anywhere near able to!

    • Umm why don’t you take on more student loans and invest in the stock market since “it’ll grow insanely in the next 40 years!”

  10. 9 – I worked for my Dad. He put my earnings in investments.

    My advice – doesn’t matter where you put it, just get it out of easy reach!

  11. I was 22 when I opened my first TSA. Along with the retirement from CalSTRS, which was automatic. Hubby had a to wait a year at his position, so he started at 23. We both opened Roths at 24 and this is our first year to max it out (thanks to you!).
    Glad we started so young, it adds up!

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