How to Get Rich at a Young Age
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What is the importance of saving money? How to make extra income? How to become rich from nothing? Every second, there are 63,000 search queries on Google, and these questions rank as the most searched questions of all time. But the answers that you can find are, more often than not, vague.
I know a kid who grew up in the projects and was raised by a single, illiterate parent. He had nothing to lose and nothing much to gain because at that time, resources were tight. But he found the love for spending time in libraries to get ahead. This kid grew up, mustered all his determination and courage to make his first million at 22, and became a multimillionaire by 24.
I am that kid in the library, the same guy who made millions in his early twenties. Let me share some bits and pieces of advice on how to get rich at a young age, drawing from my personal experiences.
1. Believe in yourself
First one on how to get rich at a young age is to believe in yourself.
Before investing in businesses and other things, you need to invest in yourself first. A study published by BBVA research found that confidence affects financial behavior and success. According to this study, individuals with higher confidence levels score higher on tests for financial literacy.
To build a stable financial status, you have to believe in yourself that you can, and you are able. I know it could be challenging, especially if you come from a financially challenged family background, but it doesn’t matter as long as you are motivated to work on it and work on yourself. It doesn’t matter. You have to focus on what you can do and what you can monetize from your skills.
In business and your personal life, self-confidence is the first step in taking massive action. You need to believe in yourself – in your abilities, skills, and passions – to leap into entrepreneurship or any other aspiration. In asking, “why is it important to believe in yourself?” The answer is easy: confidence is the anchor of exceptional leadership. It lets you manage and inspire others with assurance and direction. Learning to believe in yourself is critical to creating the life you desire.
2. Pay yourself first by saving.
Did you know that according to the 2021 survey by Bankrate, more than half, 51%, of Americans have less than three months’ worth of emergency savings?
When your salary comes, pay yourself by putting aside some of your income for personal savings to have something aside for any investment or emergency you may have. The purpose of paying yourself first is to build up a nest to secure your future and create a safety net for a financial crisis such as your car breaking down or unexpected medical expenses. Without savings, many people report experiencing a large amount of stress.
Knowing that you have accumulated a certain amount for times of need gives you peace of mind. You can lead a stress-free life knowing that you will not have to struggle if things take an unexpected route. By saving now on the side, you can buy a house, accumulate funds for your retirement, or purchase a vehicle. You can secure your future, your child’s education, indulge in the best things that life offers, and live a very fulfilling life. Having money eliminates almost half of the problems that you can encounter lifelong.
3. Allocate your income
What do you usually do when your salary gets credited to your bank on your payday? Do you hit the bar at once and throw your money on alcohol? Or do you go straight to the department store to check out that purse you’ve been eyeing for a long time? That is a common mistake people have been making from time to time. If you don’t budget your money wisely, it will take a toll on your future. It would help if you don’t spend BEFORE saving; instead, you only spend AFTER saving.
The 50-30-20 rule is the best money advice that I ever got to cure this bad habit, and it’s from a book titled “All Your Worth” by Elizabeth Warren and Amelia Warren Tyagi. The 50-30-20 rule works like this:
- 50% of your income goes to things you must have/need to spend on (rent, electricity, food, taxes).
- 30% goes to something you want to buy (that new iPhone, eating out, relaxing, and watching a movie).
- 20% goes to savings (bank savings, insurance, college funds, you name it).
4. Leverage your investments
Now that you know the 50-30-20 rule let’s talk about how you can leverage your savings and investment. What do you plan to do with the remaining 20%? Have you already booked an out-of-town trip to Hawaii with the mindset that you need this ‘treat yourself’ idea?
According to Gallup, since 2009, only about 55 to 56% of Americans own stock investments. This is only a modest amount considering it’s already 2023, and it hasn’t increased.
This time I’d like to introduce you to delayed gratification. It involves the ability to wait to get what you want because of getting better rewards. This ability to resist temptation and stick to our goals is often called willpower or self-control, and delaying gratification is often seen as a central part of this behavior. We put off what we want now to perhaps get something else, something better, later on. If you can put off switching to a new phone that costs you $1,500, you may utilize that money to start on an index fund with a minimum investment of only $1,000 which can eventually make your money grow.
5. Reduce your monthly expenses
How much money do you set aside for your future?
Most likely, what happens is you spend 50% on rent, electricity, water, and other mandatory dues, 30% on leisure, leaving only 10% on investment and 10% on savings. What you can do is look at your mandatory expenses and optional expenses. Weigh what the priorities are. Check what costs you can lessen your spending to leverage more money for savings and investments.
What expenses can you cut out to save money? Are there newspapers, magazines, make-up, movie, or podcast subscriptions that you aren’t using very much anymore? Call the bank and cancel them. You’d be surprised with the amount of money you can save after doing so. If you miss them in the future, it’d be easier to resubscribe than pay them monthly without even using them.
6. Improve your decision-making skills
How long does it usually take for you to decide before you make a purchase? Have you ever thought about buying a house for your future? Strong decision-making skills are essential in building wealth. It helps you weigh options and make informed choices regarding financial situations like how and when to save and spend, comparing costs before a big purchase, and planning for retirement or other long-term savings.
Small decisions like wasting your money on small, frequent purchases negatively affect your finances. And whenever you make a decision, ask yourself, can I afford and sustain this for the following years? Or will I be in massive debt? What costs can I cut first before buying a house? Your big decisions have to synchronize with your small decisions.
7. Find a side hustle
The percentage of Americans working more than one job to make ends meet has been growing over the past two decades, and the pay from second jobs makes up a substantial share of workers’ earnings. According to new data unveiled by the Census Bureau, an estimated 7.8% of U.S. workers had more than one job as of the first quarter of 2018, up from 6.8% in 1996.
Researchers said that the earnings from the workers’ second jobs make up an average of 28% of their total earnings, showing that workers are likely relying on that pay.
What you can do is to for a job that you can do on top of your full-time job. It could be a flexible second job that you are passionate about and brings in money. You can make use of your hobbies like drawing, graphic designing, writing, trading, etc. Having multiple sources of income is empowering. You can use the extra money to pay off debt or build more wealth. In some cases, you might discover that this side hustle is the job that you are passionate about. You can make it grow and maybe turn it into a business.
There is no easy way to succeed.
Wealth is built over time. When I was younger, my mom and I had nothing but courage and determination. We didn’t even have enough cash to put me in daycare, so I had to self-study in libraries. I had to learn everything the hard way. As early as now, it is essential to realize that there’s no fast way to success, and there are a lot of struggles along the way. Before I had everything I worked for, I also started with nothing and failed many times. Eventually, those things paid off and made all the difference today.
Pick two or three from the tips I have given above and stick with it. However, it’s also vital to add discipline to the equation. Without the discipline to invest and save, you’re most likely to go off track. But that doesn’t mean you should give up. You have goals for a reason. Reflect on that reason when you feel like giving up.
There’s always tomorrow to try and start again.
If you wish to know more about other ways on how to get rich at a young age and to improve your habits, finances, and mindset, check out my other articles to visit my Youtube account at Munif Ali – MPOWR.
- Arellano, A., Cámara, N., Tuesta, D. (2014). The effect of self-confidence on financial literacy. BBVA Research. working paper.
- Beers, B. (2021). “Survey: More than half of Americans couldn’t cover three months of expenses with an emergency fund”. Bankrate.
- Cherry, K. (2020). “Delayed Gratification and Impulse Control”. Very Well Mind: Personality Psychology.
- ICICI PruLife Staff, (n.d.). “Importance of Savings”. ICICI Prudential Life Insurance.
- Kagan, J. and Estevez, E. (2021). “Pay Yourself First”. Investopedia.
- Marte, J. and Lucia, M. (2021). “Share of U.S. workers holding multiple jobs is rising, new Census report shows”. Reuters.
- Saad, L. and Jones, J. M. (2021). “What Percentage of Americans Owns Stocks?”. Gallup.
- Sales, V. (2017). “The 50-30-20 Rule”. Sun Life: Grow Your Money.
- Tony Robbins (n.d.). “11 Ways to Believe in Yourself”. Robbins Research International Inc.
- Velasquez, F. (2021). “Over half of Americans have less than 3 months worth of emergency savings”. CNBC: Make It.
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Being successful as a person can both be learned and taught, but you must have the willingness to overcome obstacles and create habits that will make you more successful . I will give you the systems that will do both.
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