Invest in Your Future Early at 25

It can sound intimidating or completely irrelevant to invest in your future at the age of 25. But it is important to get a headstart simply because, the more money you invest/save today, the more you make later.

If you are new to this game, think about this: 

  • Invest at the age of 23 by putting away just $14 per day to reach a quarter of a $1 million by age 67. 
  • 7 years later at age 30, and you have to increase that amount by 50% which is $21. 
  • Let’s say you started saving at age 35 instead 23, you’ll have 12 fewer years left in hand to invest, which means you’ll be forced to save more than twice per year than if you started at age 23. 
  • The lesson: invest in your future. 

In this article, we cover tips on starting to invest for the first time and how to attain your long term financial goals using tried and tested principles and habits. 

Get more in return by starting early

As we saw in the example before, getting just almost a 10 year advantage helps you earn more money by the time you retire at age 67. A common misconception is to believe that you don’t earn enough to invest now and will catch up later. All you need is to keep aside a certain amount ($14 to $21 dollars) instead of waiting for a “someday raise” or “bonus”. Before you know it, you’re burning precious time.


An automated or automatic deposit solution to saving comes from your work. Some employers even give people money towards saving for retirement through 401(k) plans. The reason why it works is because you don’t have to keep procrastinating as the 401k will do the tough job of limiting. The benefit of which is building wealth as the contributions come from automatic payroll deductions (or contributions directly from your paycheck pretax).

Since it is a tax-advantaged retirement account, you can allow your money to get automatically transferred from your paycheck or bank account into a savings or investment account every single month. As you set up automated deposits, you have already kept money aside before you see it or get tempted to spend it. The 401(k) can anticipate that you could easily go off the financial rails so it acts as a barrier you set up that allows you to outsmart yourself so you manage money wisely. Consider instructing your employer to withhold enough through salary deferrals to ensure that you reach the maximum limit each year. 

Other Options:

  • You can also look out for 403(b) or 457 plan at work places. 
  • If you are self-employed then, depending on your income, you can contribute to a SEP IRA, profit-sharing plan or independent 401(k) plan.
  • If a 401(k) isn’t an option, try to meet the income requirements for a Roth IRA. Unlike a traditional IRA or a 401(k), it won’t give you a tax break on contributions, however, it offers something interesting. You can skip the payment of federal taxes when you pull money out during retirement. Yep, your contributions and investment earnings will accumulate tax-free.

Learn to love risk

This is wisdom in the making, capitalize now! 

Young investors keep trying to avoid risk even though it helps them over a long time frame. So learn to love a calculated risk when you are young. 

It can be a prudent decision in the long run, because when if you are young, you can recover faster from any financial mistakes made now, instead of later (when the responsibilities of life pile up to the roof with a mortgage and you’ll only think about playing it safe).

Certain calculated risks look like this: 

  • Shifting to a new city with better job opportunities
  • Getting more education for additional training to increase salary
  • Starting a new company or joining a small startup
  • Investing in high risk/high return stocks

Now speaking of the last point, high risks stocks always sound scarier than say, putting your money safely in a savings account. But if you want the rewards, you have to take a calculated risk and invest in stocks. 

Of course, when you invest in stocks, you’ll see drops and dips in the short term. Generally, this market is no-go if you need the money within five to 10 years. But history and analysis show us that, in the end, you’ll come out ahead for long-term financial goals like retirement. One reason for investing in your 20s is that you’re looking at years to come which allows you to capitalize on all that growth.

According to a Vanguard analysis, a portfolio of 70% stocks and 30% bonds — a reasonable stock-to-bond allocation for growth showed an average annual return of 9.1% between 1926 and 2015 (even with the unstable years of 1931 and 2008). Bonds are a much safer, low return investment that can counter the high risk of stocks. But those who played it safe and stuck strictly to bonds saw a return of just 5.4% on average within that same period.

These are the years when facing a terrible result of your investment won’t damage much of your budget – do that without any hesitation because a risk mostly gives huge profits.

Invest in education

Financial management and investing are lifelong endeavors, but start on investing in YOURSELF first. 

Build your value through hard work, upgrading of skills and knowledge, and by making smart career choices. Education is essential these days and, additionally, it costs a lot. Investing in your education is a great opportunity to spend your money wisely. It will help you get a good job that`will provide you with enough money for a comfortable living. Choose the subject carefully and make sure that you are  interested in your future profession. Getting a prestigious diploma is expensive today, so think before making your final decision.

Improve your career with efforts that impact financial security rather than tightening your belt and trying to save more. 

Also, people who are financially literate end up with more wealth. This is because they take the time and effort to become knowledgeable in the areas of personal finance and investing. 

Set short-term goals to achieve long-term ones

As your plans at this age change every so often, the prospect of planning far into the future is a daunting task for young investors. That’s why saving is a great short term goal. 

Short term goals are more practical and measurable than long term goals of investing, these include

  • Let’s say you want to save up for a car you want to buy within the next year or two, keep it 100% safe in a high-yield bank account. 
  • Or save for an annual holiday
  • Emergency funds for unexpected medical expenses or losing a job.
  • Pay off a credit card debt or student loans in a matter of months
  • Contributing to your company’s 401(k) plan with a contribution each month. 

As you crush these short-term goals, set new ones. If your goal is to be worth a million dollars by age 40, you need to first reach smaller goals like having $10,000, $30,000 and later $500,000 and so on.

Emergency Funds: The intention of savings is not to put your cash reserves at risk but to preserve it so you can tap into it in an instant if you need it. It’s not about growing the cash reserve either, it’s just about an emergency fund.

An important investment for the future is an emergency fund. It’s wise to have some extra money if you suddenly find yourself in hard situations down the road. Furthermore, this fund will make you feel confident in life in general but only if you can avoid spending this money without any extra needs.

If you don’t have an emergency fund that’s equal to at least 3 to 6 months’ worth of your living expenses. Set aside 10% of your gross pay until you have a healthy cash cushion to land on if you lose your job or can’t work for an extended period.

Invest money to accomplish long-term goals

The good news is, once you follow the steps to providing short term preparations, you automatically become financially prepared for the distant future as well.

This habit should keep growing and you can take it further by setting up automatic monthly contributions. That’s where long term investments come into the picture because unlike short term saving they are meant to grow money for your retirement. 

If you only get a 7% average return on your investments, you’ll have over $1 million to spend during retirement if you put aside $400 a month for 40 years.

Start with a minimum of 10% to 15% of your gross income for investing in retirement. Yes, that’s in addition to the 10% for emergency savings mentioned before. Consider these amounts as monthly bills or dues to yourself, just like a bill with a due date.

If saving and investing a minimum of 20% of your gross income seems is too much, start tracking your spending carefully and categorizing it. When you are aware of exactly how you’re spending money, you’ll find opportunities to save more.

Once you build up a good emergency fund, continue putting aside 20% of your income. You could invest the full amount or invest 15% and save 5% for something else, like a new house or a vacation, or another car.

You will be grateful to yourself if you start saving it from this very moment.


Being your own boss for yourself and doing what you love can be rewarding — monetarily and emotionally.

One of the best ways to provide yourself with money in the future is to start your own business. But be warned that having a successful business can be difficult. Not everyone`is able to cope with this task as it requires lots of work, careful and smart planning and well-developed leadership skills. If you feel like you can do it, try it because nowadays business is extremely profitable and it may give you a long-term income.

Avoid investment funds with high fees

Different funds charge different fees commonly called an expense ratio. For instance, an expense ratio of 2% per year means that each year 2% of the fund’s total assets will be used to pay for expenses, such as management, advertising, and administrative costs.

If you can choose a similar fund that charges just 1%, that may seem small, but the savings really add up over time when you consider that they come off your potential annual return.

For instance, if you invest $100,000 over 30 years with an average return of 7%, instead of 6%, you’ll save close to $200,000. Choose some low-cost funds to get the benefit of higher returns.

Borrow money for investments not on a lifestyle 

Using credit for constant borrowing will assure that there is no money available for investing. Then the added interest add to the expense of borrowing further and increases the cost of that lifestyle.

To borrow money to investing your gain will outrun your borrowing costs. 

This could mean investing in the literal sense (stocks, bonds, etc.), or it might mean investing in yourself – for your education, to start a business. Borrowing for these purposes can provide the leverage you need to reach your financial goals faster. 

Take advantage of financial freebies 

If you company offers a pension plan, take the free money it offers. Then contribute at least up to the maximum of what your company will match.

You can also look for legal methods to take advantage of tax laws. For example, contributing to an individual retirement account (IRA) will result in tax savings; in effect, the government is giving you free money and providing you with an incentive to contribute. 

Get help managing your money

With a 401(k), you can get help managing money which is typically available through a target-date fund. 

This type of fund takes less risk as you age. Pick one by using the date in its name, which is supposed to line up as close as possible to when you plan to retire. So if you’re 25 now, just add around 40 years and pick a fund tagged 2055 or 2060.

Generally, you would pay higher expenses in a target-date fund, but some investors find the simplicity is worth it. BUT can always swap to a different fund later.

If you’re investing in an IRA, you could open that account with a robo-advisor, which is a computer-based investment management company. They also charge a percentage of your account balance for their services. However, companies like Wealthfront and Betterment cost less than 0.50%, and that includes investment expenses and management fees.

Modest lifestyle costs

Many new millennials find that in the first couple of years of working they have excess cash flow especially when compared to making nothing in college. When you get so used to a frugal student spending habits, there is more money than you need.

Instead of using this excess income to buy new things and living a more luxurious lifestyle, the best move is to put the money toward reducing debt or adding to savings. As your career and responsibilities grow, your salary should also grow side by side.

People get into trouble by feeling entitled to a standard of living that needs deep pockets. However, if you keep your standard of living below what you earn, there’s no need to cut back to accumulate money. 

Neglecting to invest even small amounts of your income can cost you in the long run. The earlier you start saving and investing, the more financial security you’ll have. Please remember that you’re never too young to begin planning for your future wealth.

Financially, you can’t live in your 20s as if today is your last day. I made this mistake in my early 20’s and either went shopping so frequently towards buying a lot of cheap bags, shoes, jewelry and then mixed it with shopping rarely for very expensive goods. Now as I have crossed being the age of 25, my funds are starting to deplete so much that I cannot afford a dream vacation..instead, all I have is a cupboard FULL of clothes and other material things.

You have to decide between what you spend on today versus what you’ll spend in the future. Finding the correct balance is the most important step toward achieving financial security. 

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