When I started blogging, I often complained about not learning about early financial independence when I was in my 20s. I could have saved more and retired from my engineering career with a bigger retirement fund. The earlier you start saving, the more you can grow your investment. However, I recently changed my mind. I was browsing the early financial independence forum on Reddit, and I found that young people in their 20s are very nervous about early financial independence.
A few days ago, I saw a post from a 22-year-old guy. He makes $70,000 a year and has some money saved. He lives with his parents and is aiming to retire early with $12 million. He seems nervous about the trade-off between moving out on his own and investing more to retire early. If he gets an apartment, he won’t be able to save as much and it will take him longer to reach his goal.
As a 50-year-old man, this seems crazy to me. It would take years to accumulate $12 million. A lot can change along the way. There’s no need to stress too much about retiring early when you’re 22. Early financial independence is like sailing to a destination. You’re trying to steer in the right direction most of the time and correcting your course as necessary. There’s no straight path from $70,000 to $12 million unless you get lucky with an inheritance.
Youth
When I was 22, I didn’t care about retirement at all. I was busy working, going out, making friends, dating, growing up, and having a lot of adventures. I was learning how to be an adult. It turned out to be the best time of my life. I have so many fond memories from those days. Life was so much fun back then. Everything was new and exciting. Life was also good in my 30s and 40s. But it was much smoother. Once you have a family, you focus on that. Things settled down and the years went by so quickly. That’s when I worked on becoming financially independent.
Fortunately, I was already frugal and started saving when I was 22. I contributed 10% of my income to my 401k and increased that amount each year. After a few years, I maxed out my 401k and Roth IRA contributions and invested more in my brokerage account. The plan worked out great, and I retired from my engineering career at 38.
Now, I’m glad I spent some money recklessly and made some mistakes when I was 22. You learn from your mistakes and grow. Those years helped me become a confident adult. After college, Ms. RB40 joined the Peace Corps. She left to see the world for 3 years. I noticed a huge difference in maturity when she came to see me. I wouldn’t have grown as much if I had been living at home and saving every penny.
Top 3 Things to Focus On
Young people in their 20s shouldn’t stress about retirement. Financial independence is a marathon, not a sprint. They should focus on the present and enjoy it. Lay the foundation for financial independence and then put it in the background. You need to develop good financial habits first. Here are my recommendations for the top three things to focus on.
- 1. Start saving
Start by saving 10% of your income. Contribute to a 401k and a Roth IRA. Once you’ve maxed it out, invest in a good passive index fund in a brokerage account. The goal is to increase your savings rate to 50%. Once you’ve reached 50%, you’ll be well on your way to financial independence. In the meantime, read up on investing and early retirement in your spare time. Don’t sweat it too much.
- 2. Finding the right partner
Finding the right partner is the most important part of your early financial independence journey. Your journey will be much easier if you find someone with similar financial goals. On the other hand, the wrong partner can make early financial independence impossible. Mrs. RB40 and I are both frugal. We value financial independence very much. We wouldn’t have gotten this far if we didn’t have similar goals.
Unfortunately, I don’t have any specific advice on how to find the right partner. Dating seems to be going crazy these days with all the apps.
Imagine what happened? I had no confidence in myself at all when I was in college. I was a nerdy engineering student with no money. After college, I got a job and lived on my own. I had to find an apartment, learn how to cook, pay my bills, find a dentist, buy furniture, all sorts of normal things. By that time, I was an adult. Those few years gave me a lot of confidence. Money helped too. I could buy whatever I wanted and take girls to nice places. It was so much better than being a poor college student.
Living with your parents may save you a lot of money, but I don’t think it’s the right choice for most young people. It’s better to learn to be independent and take care of yourself. Also, it’s harder to attract a partner if you live at home. In my opinion…
Do you want to come spend some time at my parents’ house? No, thanks…
conclusion
Well, I have more, but I don’t want to bore you too much. People in their 20s should enjoy life and enjoy it. Learn how to be an adult and build the confidence to face the world. They shouldn’t be stressed about retirement yet. Once you have a family, life will go much smoother. At that point, you can focus on early retirement and investing more.
What do you think? Should young people save more or postpone early retirement until later? I think there are more important things than retiring early at 22.
Image credit: Titbert Slim
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Passive income is the key to early retirement. This year, Joe is investing in commercial real estate with CrowdStreet. They have several projects across the USA, so check them out!
Joe also highly recommends Personal Capital for do-it-yourself investors. It has many useful tools that will help you achieve financial independence.
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