The age of your 20s is crucial, especially when you think about financial principles. It’s a chance to enjoy the greatest liberty you’ll ever learn before you retire. In addition, it’s also the perfect age to start saving because you have so much time on your hand and can enjoy the compound interest magic.
Here are 3 financial principles you can start practicing in your 20s that will help set you up for long-term success.
1. Understand Compound Interest and Valuation
One concept which is typically ignored when people make long-term financial decisions is the influence of inflation and the definition.
Saving small today can add up to real wealth in the future thanks to compound interest. But be warned: Compound interest is a double-edged sword: A small debt today can add up to a large debt tomorrow.
Additionally, seek to make valuation-based financial decisions. Buying your house isn’t necessarily a bad idea.
In fact, one Harvard University study found that homeowners have a greater net worth than renters. Instead, investing in low priced stocks is not a successful idea. You will plan to invest in the assets at an attractive valuation.
2. Generate Passive Income
The quicker you can get your money to work for you and produce revenue while you’re sleeping, the better you’ll be able to live your dream life, raising stress, and potentially live longer as well.
When you generate passive income, you create the ultimate form of freedom. Your time on this planet is limited, and it’s important to find ways to ensure you can maximize earnings while minimizing your time spent on working.
3. Be Patient
Your health and peace of mind are your greatest assets. Never sacrifice your health for money — even when you’re 22, you think you should.
We all possess power and special. But, we are not that different from each other.
We can all be anyone, but what is influencing your acts from today is how much we want to become that person.
And there’s no better time than your 20s to dream big, think big and, most importantly, act big.
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