My Advice To Creating Wealth At 20s & 30s
Posted by Frugal on July 7th, 2006
At 20s & 30s, most of your friends from childhood to college start to take very different roads in their lives. Some people get married right after college or even after high school. Some people go on to get a master’s, Ph.D., or a professional degree. Some people take up a job after college. Lives after school years start to diverge quite a bit. Around this age, in respect to everyone’s future money-making potential, majority of differences may be cast in stone.
Unless you graduate with a more specialized college degree such as engineering, finance, or accounting, your college degree may not be a front row ticket to the job that you want to do, assuming that you know what you want to do. By the time when you get out of college, you should really know what you would like to do at least in some particular field, if not a specific job function. Doing volunteer work or better yet money-earning internship will help you to understand what you like and don’t like about a particular job. The work experiences from your internship will help you later in landing in a (better) job offer in the same field. By doing internship, you can also realize firsthand on what course works you need to do your job better. Work experiences during college years are very supplementary to your studies and your future. If you didn’t go to a nationally top-rated university, and you didn’t graduate with a specialized degree, chances are that it is relatively tougher for you to find a job. In that case, you should really work on your connections and networkings thru friends, schools or other organizations. Or you can also decide to go for a professional degree after college, such as MD for medical doctors, MBA for business managers and accountants, and JD for lawyers. (Good) MBA programs usually prefer to accept students with certain amount of actual work experiences under belt. In that case, you may want to plan your ways to MBA program, after some years at the job. In any case, further professional degrees are always desirable. Those degrees can give you the best match towards potential employers.
Once you get a job, you will be earning the very first significant paycheck, experiencing the first taste of total financial independence. But it is crucial to choose your first job carefully because it will determine the future direction on your career. Your first years on the job determine the first impression that you will be making to your current colleagues and managers, and also your future hiring managers. The work experiences that you obtain in the very first years are actually more important than your actual earnings. You want to gain experiences that will enhance your future earning potential. A current good salary that does not accompany with valuable work experiences to increase your specialized skills is not good for you in the long term. Having a long term prospective on your career is important to increase your earning potentials in the long run. Especially the first few years, I will trade salary wage for any opportunities that enhance my skills & knowledge. Of course, salary needs to be reasonable too. You don’t want to become a complete slave for the next great IPO company that may never happen, and simply take home shares of yet-to-be-IPO instead of cold, hard cash.
At last, in your 20s & 30s, it’s the best time to take some managed financial risk to join a start-up or start-up your own company preferably before you have a family. Without taking risk, your potential reward is definitely less (although more steady and certain). Since you don’t have much to begin with, you don’t have much to lose either. The only big thing that you can lose is your time, and you have plenty of that since you’re young still. Therefore, taking some measured risk on your time and salary for a bigger potential financial reward, with career-enhancing work experiences, is definitely advisable. How much time you want to spend (and potentially waste) in such ventures is entirely up to personal preferences. Some eternal optimists can go on without stopping even into later years. I’m more conservative, and I will pay attention to slowly build up a nest egg, given the passage of time. After all, it does take time to build up your wealth. You don’t want to be so busy trying to create wealth, while at the end, have nothing to show for it.
In summary, I recommend that people to take the following activities to build up their potential for creating wealth:
- Get a specialized professional degree if possible.
- Pay attention to work experiences, and build up some solid skills.
- Take some managed risk to try a smaller company or start-up one’s own company.
And of course, it goes without saying that building your networking and connections throughout the years is important at all times. By having a long term perspective on your career (and maybe a second career while you work), you will be able to create wealth with all the necessary skills & experiences.
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July 7th, 2006 at 2:12 pm
Great advice frugal. Thanks.
July 7th, 2006 at 7:42 pm
Very sound advice. I got 2.5 out of 3 in the early stages of my career. I got the specialised degree, I spent a bit time working for a smaller company where you do not have the resources to support your function and, conseqently, are forced to be more of a self starter. This was subsequently proven to be very valuable experience. I put a lot of effort into to developing my job specific skills. Where I fell down was IT skills, something I am still struggling to catch up on.
July 7th, 2006 at 10:28 pm
Looks like you’re very well-positioned, TraneeInvestor.
You cannot spend money to buy your valuable work experiences. Those experiences that are obtained in the first few years can shape your career to come for a long time. Even after almost 10 years, the work experiences that I obtained in my first job have been very positive till today. I went to my first job, mainly because of the potential valuable work experiences. The location was not conducive for wealth. The salary was so so. But I got what I really wanted, a solid valuable work experience, that so many others couldn’t get.
July 9th, 2006 at 3:36 am
I 100% agree that first job influnce a lot on our career path in the later stage. Building solid specialize skills during our 20s is very important.
July 12th, 2006 at 8:56 am
Unfortunately in today’s environment you can’t count on staying with one company and getting promotions when you’re ready for the next step. It seems like a lot of companies would rather bring in someone new than promote someone that they already have.
What kind of “job path” would you suggest? How often should people start looking to upgrade their responsibilities? When should people consider relocating for better opportunities?
July 12th, 2006 at 11:50 pm
You have asked very good questions. I will try to address your questions in another post later (could be much later, really strained for any avail. time these days). But in short, I would say that the best criterion for a person to move on is that when you have learned what you can learn on a job or at a given company, and cannot grow more in terms of accumulating good experiences, then probably it’s time to move on for a better career-building position. Unfortunately, not everything works in a linear fashion. There are always many other things that you will need to consider, including your family.
April 17th, 2007 at 5:34 pm
To play devil’s advocate here:
Specialized skills (in particular I think of an engineering degree) can actually stick you in a bit of a cul-de-sac. You are very good at something lucrative when you start, but your professional growth may be limited because of a lack of skills like communication, general adaptability, skills that become obsolete over time (what ever happened to the mainframe programmer?)… I think career resiliency depends upon a lot of things that the specialized professional degree may not bring you.
Personally, I favor the liberal arts education– while you start out a little rougher, you have the skills to go higher. I would tell my own children (eventually) that the key is understanding money and business, but not making them the center or the be-all and end-all of your education. Let university be the place where you prepare yourself to prepare yourself, because the next 20-50 years will be about change, change, change. (My perspective comes from having a CS undergrad degree and a graduate degree in literature, both from very good schools.)
In some ways I’m rather behind my original classmates, professionally, because of the extra years involved in the second degree (which I finished just as the dotcom bubble burst, so I kind of stepped into a void for a while there), but I’m a broader, more effective employee and a better person from having the humanities degree than I would be if I had, say, a CS degree and an MBA. And while I didn’t have the first million at 40 (in fact I had no savings at 40), I think I’ll get there by 50, at the current rate…
Most of your other advice I agree with… I’d also add, though, that depending upon your field, people should look for jobs that involve travel, preferably abroad, even if they’re kinda mediocre jobs. A year or two of experience abroad will be very useful later.
August 23rd, 2007 at 5:00 am
Hello,
I think if we like to invest our hard earned money we need to take risks. The level of the risk that one is willing to take will depend on his/her mentality and boldness!
I am a risk taker ( not a huge risk taker).
But I am in a position to give anyone who would like to invest US$ 1000 for 3 whole months a return of US$1040.
Just think and let me know about your views.
I tell it again we take risks all the time sometimes we win sometimes we don’t.
Can anyone willing to take the risk?
Email me at vnck25@yahoo.com
December 30th, 2007 at 4:17 pm
@Framemaker Developer
I totally agree with your argument. Recently graduated with a BS in Computer Science, I have had relatively little trouble finding jobs with good pay. However, I feel my aspirations of wealth (which I’m still developing a personal definition) may be hindered by my lack of worldly knowledge. My logic may be top notch, but my lack of communication, business, and broad common sense skills makes it hard for me to imagine myself becoming the proactive, well-spoken leader I want to/can be. I was thinking whether or not it makes sense for me to go back to school sometime (I was thinking MBA), but now I’m just unsure.
@Frugal
I love the advice about taking a managed risk with a smaller/start-up company. In the past, when I worked 70-hour weeks for a small company with no overtime (meaning I would have probably made more doing a McDonald’s job), I didn’t get the mental support I wanted from loved ones especially my girlfriend. Eventually, I bucked, listening to family and friends, and left the company. That was the most exhausting job I’ve ever done, but I don’t regret any of it from the vast amount of experience I gained from it.
Even though my worldly skills are not up to par, I really appreciate that I have the ability to develop the crazy ideas I have in my head into actual projects with my technical skills. Although good projects don’t mean good businesses, I feel I’m in a better position than other people with good ideas because 1) I can execute it myself (develop/program this thing) 2) I am in control of what I’m developing (instead of trying to explain to someone else the vision), and 3) I know what is technically possible/what’s not.
@Anyone and everyone
Here is my situation…I am a 23 year old college grad with a BS in Computer Science. I am a jack of all trades Web Developer. I have done a dozen freelance jobs, contracts, and internships over the years. I am $75K in debt ($20K credit cards, $20K car loan, $35K rv loan [the girlfriend wanted it…arg, don’t ask, lol]). I live rent-free at my parent’s house. I was thinking of putting all my efforts into the best paying contract jobs and pay off my debt as quickly as possible. Then I was thinking of saving up for a house and getting a place of my own. Do you think this is a good way of creating wealth, or could you advice/suggest on other ways? Thanks.
April 18th, 2008 at 12:10 pm
Really liked the article, especially the parts about planning a direction instead of just taking any opportunity that comes your way.
May 5th, 2008 at 10:46 am
@23yr old grad:
Look at your situation and follow the advice of those how KNOW how to build wealth from little. Sell the RV. Sell the $20k car, and purchase a low-miles quality used car for under $10k that will last you 8+ years (2003-2005 Corolla with 30k miles comes to mind). The first step to wealth is to eliminate debt. Rent-free is nice, but it’ll only go so far.
I learned the hard way as well. I was in college for 8 years, finishing with a BS in CS after changing majors a few times - initially entering college as a Micriobio/Pre-Med student. I landed my first job 2 months out of college, with $15k of debt. Thinking I could afford a new car on my decent salary as a software engineer, I took on a $38k loan on a new car. That just extended the time it took to pay off my college debt for over a year. I’m now going to sell the car to purchase an inexpensive car (lower insurance and gas mileage) without a loan, which will finally leave me completely debt-free. Then I can focus as much income as possible on saving and investing.
If I had to do it again, I would follow the advice of others. Skip the luxury car. Purchase a cheap daily driver. Pay off college debt as fast as possible. Live cheap - skip gym membership and expensive tv and cell phone plans. Live with roommates to split bills and lower rent. Don’t eat out frequently. Skip expensive trips. There will always be time to do these things after the debt is paid. Max match your 401k. Always invest extra cash - use interest to your advantage. There are so many things that can all be done to save and maximize your investments, and combined they make a significant difference.
May 5th, 2008 at 11:13 am
@codeX
Thank you for the good advice. I’ve recently been listening to Dave Ramsey podcasts, and he confirms all of your thoughts.
July 16th, 2008 at 10:53 am
I agree with what was said above but must disagree with some of the comments. A young person getting into the financial world will soon realize they have extra money and will do 1 of 2 things. Spend it, or try and invest it. The old notion of high returns meaning high risk is very wrong and will destroy many financial lives from the get go. For young people who do have cash available and are looking to invest, and for all people for that matter, they need to take their money and invest in themselves. Pay off your car loans and student loans and pay back yourself the interest. You will be amazed at the power. We call the concept becoming your own banker. By becoming your own banker you will receive greater financial returns than any other financial tool out there, and we teach the best method to doing so to shelter from taxes and create a vehicle to increase your wealth exponentially.
http://www.becomingyourownbank.com