15 Smart Money Moves for For Every Stage Of Life

When you're young, you have time, you have health, but you have no money. When you're middle-aged, you have money and you have health, but you have no time. When you're old, you have money, you have time, but you have no health. By the time people realize they have enough money, they've lost their time and their health. This quote, written by Eric Jorgensen in "The Almanack of Naval Ravikant," reminds us of a very important fact: our time here is limited. When it comes to building wealth, we need to be tactical about it.

So, how do we position ourselves to make it happen? Well, you've come to the right place, Alex, because we're about to answer this very question. If your dream is to retire early, enjoy that sweet life on a beach where nobody can bother you, and live a life of plenty, well, you'd better watch this video until the end. Here are 15 smart money moves for your 20s, 30s, and beyond.

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Now, just to clarify, we've split this list into three categories, with five smart money moves for each group. Just know that some of these apply to all age groups, so don't stop doing some of them just because they're not mentioned on the list.

So, with all that out of the way, let's dive in, starting with smart money moves for your 20s.

Number one: Make your first investment as early as possible. Warren Buffett made his first investment when he was 11 years old, so by this argument, there's no such excuse as too young to invest. There are many reasons to do so. Here are three facts that strengthen this argument:

Early advantage of compounding interest: One of the main reasons to start investing in your 20s is to take advantage of the power of compounding interest. Compounding interest is the process where the returns on your investment start to earn their own return. The earlier you start, the more time your money has to grow. Each year's gains can generate their own gains the next year, creating a snowball effect that can lead to substantial growth over time. A person who starts investing in their 20s can end up with more money at retirement than someone who starts in their 30s or 40s, even if the latter invests more money.

Early habit formation: Starting to invest in your 20s also helps establish sound financial habits early on. By consistently investing a portion of your income, you'll get into the habit of living on less than you earn. This habit will serve you well throughout your entire life, helping you to save more, avoid debt, and achieve your financial goals. Plus, the discipline and patience you'll learn from investing can be beneficial in other areas of your life as well.

Higher risk tolerance: When you're in your 20s, you typically have a higher risk tolerance and longer time horizon, which means you can afford to take on more risk in your investment portfolio. This allows you to potentially achieve higher returns by investing in assets like stocks, which can be volatile in the short term but tend to provide higher returns over the long term. If the market goes down, you'll have more time to recover before you need to start withdrawing your money in retirement. Also, by starting early, you'll get to learn and understand market dynamics, which would serve you well for the rest of your investing journey.

Number two: Invest in self-knowledge and education. Investing in yourself and your education is often cited as the best investment because it leads to personal growth, professional development, and ultimately better income opportunities. Your skills, knowledge, and abilities are your most valuable assets. With the rapidly changing job market and technology, continuous learning and skill development are crucial. By investing in your education, you're ensuring that you remain competitive and adaptable. Upgrading your skills or learning new ones can open doors to higher-paying jobs, promotions, and new career paths.

Moreover, investing in education is a great way to future-proof yourself in an era of automation and AI. Jobs that require uniquely human skills are less likely to be automated. Unlike other investments, the return on investment from education and self-improvement is something that can never be taken away from you. No matter what happens in the economy or the job market, you will always have the skills and knowledge that you've gained. So instead of spending your money on liabilities, we advise you to invest in your education as much as possible. Remember, most of the things that we think we want, especially when we're young, we want because of instant gratification and the need for social validation, not because they're actually important.

Number three: Pay rent, don't buy a house. Now, this is one a lot of people have trouble understanding. Most people think renting is a bad thing, but they fail to see the advantages that renting offers. One of the main advantages of renting is flexibility. In your 20s, especially, you may still be in the process of establishing your career, and life circumstances might change. You might change jobs, move cities, or even move countries. Owning a home can tie you down to a particular location and make such transitions much more complicated and costly due to the selling, buying, or renting out processes involved in property ownership.

Another significant financial benefit of renting is it allows you to avoid large upfront costs and ongoing maintenance expenses associated with home ownership. Because look, purchasing a home requires a substantial down payment, closing costs, home inspection fees, insurance, possibly renovation costs. Once you own that home, you're also responsible for all of the maintenance, repairs, property taxes, and insurance costs. All of this can add up significantly, and it can be particularly burdensome if you're still working on building a robust financial foundation through your twenties.

Lastly, renting can give you time to save for a larger down payment on a home when you're more financially stable and ready to settle down with some roots. This can reduce your future mortgage repayments and potentially allow you to buy a better property. Moreover, it also provides you the opportunity to invest the money you would have spent on home-related expenses into other ventures that could yield higher returns, like the stock market or a retirement account. As such, while owning a home can be a good investment in the long term, renting in your twenties can provide you financial flexibility and stability to build a solid economic base for future home ownership.

Number four: Avoid student loans. Avoiding student loans in your 20s can be a smart money move for several reasons. Firstly, student loans typically come with high interest rates and long repayment periods. The longer it takes to pay off your loan, the more you will end up paying in interest over time. By avoiding student loans, you can save a significant amount of money that can be better used for saving, investing, or other financial goals.

Secondly, student loans can limit your financial freedom and flexibility. Monthly loan repayments can take a large portion of your income, leaving less money for other financial goals like buying a house, starting a business, or investing for retirement. This can also make it harder to change jobs or careers, move to a new city, or take on other risks that could potentially improve your financial situation.

Lastly, avoiding student loans can help you to build wealth faster. Without the burden of student loan payments, you can start saving and investing earlier, which can lead to significant wealth accumulation over time due to the power of compound interest. Plus, it can help you to establish good financial habits early on, such as living within your means and prioritizing savings and investments.

Number five: Build your credit score. Building your credit score in your 20s is a smart financial move because it's the foundation for many significant financial decisions that you'll likely make later on in life. A good credit score can open up doors to lower interest rates on loans and credit cards, which can save you a considerable amount of money over time. It's also often checked by landlords when you're applying to rent a home or an apartment and by certain employers as a part of their hiring process.

Building your credit score early can be particularly beneficial because the length of your credit history is a factor that contributes to your overall credit score. The sooner you start, the longer your history will be, which can help to improve your score. This long-term view is key to establishing and maintaining a strong credit score. Finally, having a good credit score early on gives you a buffer in case of unexpected financial hardships. If you've got a strong credit score and then miss a payment or two due to unforeseen circumstances, your score might still remain in a decent range. Without this cushion, your credit score could take a hit, and that would be hard to recover from, making it even harder to secure affordable credit when you need it.

All right, now let's talk about some more money moves to do in your 30s.

Number one: First, build your emergency fund. You should do this in your 20s as well, but now it's even more important because life's about to get real. Building an emergency fund in your 30s is a smart money move because it provides a financial safety net for unexpected expenses or income loss. This is crucial because as you mature, you may have more responsibilities, such as a mortgage, children, or maybe aging parents you're taking care of. An emergency fund can help you to handle these unexpected costs without dipping into your long-term investments or retirement savings, thus preserving your financial future.

Secondly, an emergency fund can help you to avoid high-interest debt. Without savings to cover unexpected costs, you might be forced to rely on credit cards or loans, which often come with high interest rates. Over time, the interest on this debt can add up, making the original expense even more costly. Lastly, having an emergency fund can give you peace of mind. Knowing that you have money set aside for emergencies can reduce financial stress and provide a sense of financial stability. This can allow you to focus on other important financial goals, such as saving for retirement or paying off debt, knowing that you have a safety net in place.

Number two: Diversify your investments. In your 30s, as your financial experience grows, you may have already encountered some of the risks and rewards associated with investing. Early in your investing journey, it's common to take on riskier investments for higher potential returns, as the timeline for recovery from potential losses is longer. However, as you move further along in your career and your financial goals evolve, it becomes essential to balance those riskier investments with more stable, reliable ones.

Diversification allows you to manage and spread your risk while still keeping some exposure to high-growth, higher-risk investments. It simply sets the stage for a more secure future. As you get closer to retirement, your investment strategy will likely shift to preserve capital and generate income. A well-diversified portfolio in your 30s can grow and mature over time, providing you with a robust financial foundation as you age. It's a long-term strategy not only to grow your wealth but also to protect it from the unpredictable ups and downs of the market.

Number three: Buy a home if it makes sense. Buying a home in your 30s can be a smart financial move for several reasons. At this stage in life, many people have achieved a certain degree of financial stability and career progression, which can make the cost of home ownership more manageable. Owning a home is not just about having a place to live, it's also a form of investment. As you pay off your mortgage, you build equity in your home, which can increase your net worth over time.

In addition, real estate often appreciates in value, which can offer long-term financial gains. Homeownership also comes with certain tax advantages, such as the ability to deduct mortgage interest and property taxes. Plus, having a fixed-rate mortgage can provide more predictable housing costs compared to renting, where costs may increase over time. However, it is important to consider all of the costs and responsibilities of homeownership, as well as your personal circumstances and goals, before deciding to make a big purchase like this one.

Number four: Run a serious business. At this stage in life, you likely have a better grasp of your skills, passions, and areas of expertise compared to your earlier years. You may have gained some valuable experiences and connections in your industry that can help you to succeed in your business. You've also had more time to build up personal savings, which can provide initial funding for your business and give you more financial stability as you get started.

Additionally, by your 30s, you've likely developed a stronger understanding of financial management, both personally and professionally. This knowledge is crucial in running a successful business, as financial missteps can lead to business failure. You might also be in a better position to handle the risks associated with starting a business, as you may have a clearer understanding of your risk tolerance and a better ability to weather potential financial setbacks. With a combination of experience, industry knowledge, and financial stability, your 30s could be the ideal time to start a serious business.

Number five: Plan your retirement strategy. Developing a clear and defined retirement strategy in your 30s is crucial because it sets the foundation for your financial security in your later years. It gives you ample time to leverage the power of compounding, making your money work for you over a longer period. It also allows for better handling of market fluctuations, as you've got more time to recover from potential downturns. Furthermore, a well-planned strategy can help you to envision the kind of lifestyle you want in retirement and what it takes to get there, leading to informed decisions about saving, investing, and spending.

Lastly, starting early reduces financial stress, providing peace of mind that you're on track toward achieving your retirement goals.

All right, now finally, here are five money tips for beyond your 30s.

Number one: Invest in your health. Investing in your health after your 30s is definitely a smart money move because, as you age, the risk of health issues generally increases, which can lead to expensive medical treatments and healthcare costs. By maintaining a healthy lifestyle— which involves eating well, exercising regularly, getting regular checkups, and managing your stress— you can potentially prevent or delay the onset of chronic diseases like heart disease, diabetes, or certain cancers. This proactive approach not only enhances your quality of life now but can also save you significant money in the long run by reducing the need for costly medical interventions.

Number two: Maximize your retirement contributions. Maximizing your retirement contributions as you age is a smart money move for several reasons. First, as you get closer to retirement, the time horizon for using those funds shortens, making it critical to save as much as possible. Second, your earning potential typically increases as you progress in your career, allowing you to contribute more. Third, tax-advantaged retirement accounts, such as a 401(k) or IRAs, allow your investments to grow tax-free or tax-deferred, enhancing the power of compound interest. Lastly, contributing more to these accounts can lower your current taxable income, potentially saving you money on your taxes right now. Thus, maximizing retirement contributions is a key strategy for building a sufficient nest egg for retirement while optimizing your current financial situation.

Number three: Plan for required minimum distributions (RMDs). Planning for required minimum distributions, at least in the U.S., is crucial because once you reach age 72, you're mandated by the IRS to start withdrawing a specific amount from your tax-deferred retirement account, such as traditional IRAs and 401(k)s. If you don't plan for these withdrawals, you could end up with a larger tax bill than expected because these distributions are generally considered taxable income. Moreover, the penalty for not taking your RMDs is steep—around 50 percent of the amount that should have been withdrawn. Therefore, understanding and strategizing for RMDs can help to ensure you're effectively managing your retirement savings and minimizing your tax liability. If you're a senior, you might want to contact a financial advisor to help you understand this process in greater detail.

Number four: Let money and your investments work for you. Now you’ll find out why compounding interest is the eighth wonder of the world. As you continue to invest and reinvest your earnings, your money begins to generate more money without any additional work on your behalf. This passive income can grow to be a substantial source of wealth over time. Moreover, as you approach retirement, having your money work for you ensures a more comfortable and secure future. Not only can it provide a steady income stream when you're no longer working full time, but it can also hedge against inflation and cover unexpected costs. This makes your financial journey a lot less stressful and much more rewarding.

Number five: Spend your money on experiences with loved ones. Investing in experiences with loved ones, especially after your 30s, is a smart money move because it creates invaluable lasting memories and strengthens relationships, contributing to overall happiness and well-being. As you age, the importance of material possessions often diminishes, while the value of quality time spent with loved ones increases. Moreover, research shows that people derive more happiness from experiences than material goods. Experiences become a part of our identity, promote social connections, and are less likely to be negative compared to what others have, offering a better return on investment in terms of personal fulfillment and joy.

And on that positive note, Alex, it's time to wrap up this video. We hope you found it to be a source of both practical and inspirational advice in order to help you achieve your financial dreams. These are what we consider to be the 15 most important and smart money moves for your 20s, 30s, and beyond.

Now we're curious to ask: When did you first discover the importance of financial education, and what financial tips and tricks would you recommend to other Alex viewers to follow? Drop your answer in the comments below and enrich the community. We're always so curious to hear your thoughts.

With all that said, let's call it for today. If you found this information valuable, don't forget to return the favor by tipping us with a like and a share. And as always, thanks for watching. If you'd like to learn some more, check out this video next.