5 Things I Did In My 20s That Made Me Rich In My 40s

My wife and I just sent our first child off to college, and we’ll send our second to college next year. Through all the things that go with this time of life, I’ve been very focused on teaching my children sound money management principles. And the process made me realize just how much the decisions my wife and I made in our 20s affect our finances today in our 40s.

Despite the headline of this article, we’re not quit-your-job rich. But we are comfortable. We have no debt other than our mortgage. We paid cash for our last car (a used Toyota Camry hybrid). We have money set aside for our children’s college education. And we are on track to retire.

So if you are in your 20’s or know somebody who is, here are five decisions that made all the difference.

Decision 1. I earned a VALUABLE degree: This past weekend I attended FINCON12, a conference of personal finance bloggers. One of the speakers was Liz Weston. One point she made is that not all education loans are “good debt.” Amen.

As Steven Covey said in his bestselling book, The 7 Habits of Highly Effective People, you must begin with the end in mind. Once you get the degree you are pursuing, what will you do with it?

If art history is your passion, that’s great. But recognize that a 4-year degree from a private institution will cost north of $200,000. If you borrow that money, you’ll likely spend decades repaying it. That’s bad debt.

In my case, I earned a law degree, graduating in 1992 with $55,000 in school loans. Contrary to popular belief, not all lawyers make a fortune. But it has been a rewarding career that has more than paid for the cost of the diploma. And yes, my school loans are now paid in full.

Decision 2. I avoided consumer debt: My wife and I were by no means perfect in this area. We had some credit card debt during the early years of our marriage. In fact, I wrote a series on how to get out of credit card debt for that very reason, as well as how we used 0% balance transfer cards to lower the cost of interest.

But here’s the thing. We never racked up debilitating amounts of consumer debt. We didn’t fund vacations, jewelry or expensive clothes with our credit cards. Debt that doesn’t add a nondepreciating asset to your balance sheet of equal or greater value will quickly become a financial burden.

Decision #3–Began investing early: Even if you have debt, I believe you should begin investing with your first job. With a 401(k), you can invest as little as $25 a month. If you don’t have a 401(k), you can begin investing with very little money with companies like Betterment. When I got out of school we began investing in a 401(k) even while paying off debt, and it was a habit that has stuck with us ever since.

Decision #4–Bought modest vehicles: Don’t drive your paycheck. It’s tempting to buy a car based on the payment you can afford. But the money that goes to your car will set you back later in life.

I can recall vividly my wife and I going to buy a car for me a few years after law school. We only had one car for several years, and I took the bus and subway to work. I was looking to buy something sweet, but she has always been more frugal than I. Here I am a lawyer at a big, fancy law firm in Washington, D.C., and guess what I drove off the lot. It was a used Ford Escort with manual transmission and hand-crank windows. It was the right decision. Thanks, Mrs. Dough.

Decision #5–Maintained good credit: This one was by accident. Back in the early 90’s, you couldn’t get your free credit score online. There was no “online.” Heck, I didn’t buy our first cell phone until 1995. So I had no idea what my credit score was.

But we paid our bills on time and didn’t rack up too much debt. As a result, we got a great interest rate when we bought our first home, got an even better rate when we refinanced, and got a great rate on our auto loans (we couldn’t afford to pay cash for cars until more recently).

Credit scores may seem boring, but they have a huge impact on your finances. Monitor and protect your score with care.

If you are in your 20’s, I hope you’ll give some thought to the above as you make decisions for you and your family. Trust me, you’ll thank me twenty years from now.


Topics: Personal Finance

22 Responses to “5 Things I Did In My 20s That Made Me Rich In My 40s”

    • Make sure you invest in 401K and IRA’s. I am 48 and wish I did back then. For you I think it is around $35 a month with 10% interest average you will have a million dolars at retirement. Dont quote me on exact numbers. They can be found easily

  1. Awesome to see you again in person Rob.

    I love this article. Your money-saving tips don’t have to be sexy. They just have to work.

    We all want to get rich. None of us think about credit. A poor credit score can screw you over during the most important times in your life (i.e buying a home with your new wife).

  2. I agree with every point except the degree. For many, a liberal arts degree is valuable. I majored in theatre and granted, I didn’t end up working in theatre, but my degree enabled me to learn valuable skills — presentation in front of large audiences, collaboration with different types of people, project management, etc. It also provided me time to learn more about myself and my abilities/talents for the professional world. For most people, getting a degree is the important part – whether it’s in art history or law. I wouldn’t necessarily recommend getting a masters in the arts unless you’re 100% sure it’s the industry you want to pursue and you can’t get into that industry without the training, but for undergrad, study what you love. The rest will fall into place.

  3. I agree with every point except the degree. For many, a liberal arts degree is valuable. I majored in theatre and granted, I didn’t end up working in theatre, but my degree enabled me to learn valuable skills — presentation in front of large audiences, collaboration with different types of people, project management, etc. It also provided me time to learn more about myself and my abilities/talents for the professional world. For most people, getting a degree is the important part – whether it’s in art history or law. I wouldn’t necessarily recommend getting a masters in the arts unless you’re 100% sure it’s the industry you want to pursue and you can’t get into that industry without the training, but for undergrad, study what you love. The rest will fall into place. I’m 28 and I now make $120k, all with that theatre degree.

  4. I agree with every point except the degree. For many, a liberal arts degree is valuable. I majored in theatre and granted, I didn’t end up working in theatre, but my degree enabled me to learn valuable skills — presentation in front of large audiences, collaboration with different types of people, project management, etc. It also provided me time to learn more about myself and my abilities/talents for the professional world. For most people, getting a degree is the important part – whether it’s in art history or law. I wouldn’t necessarily recommend getting a masters in the arts unless you’re 100% sure it’s the industry you want to pursue and you can’t get into that industry without the training, but for undergrad, study what you love. The rest will fall into place. I’m 28 and I now make $120k, all with that theatre degree.

  5. Christtopher

    Any suggestion, beidses dont spend $ and get another job to pay them off You have excluded the best two answers. Debt consolidation is a scam. They don’t do anything that you can’t do yourself. Most people end up in worse condition than when they started a consolidation plan. Contact each creditor and try to work out a plan that you can live with.The bottom line is you have to pay the cards back(or file bankruptcy). You will have to stop spending to have any hope of ever catching up.

  6. Mike Pascale

    Great article, Rob. I too will forward to my young sons. I agree with the degree being important. I know too many kids who get the generic Liberal Arts degree and wait tables after college. My oldest son graduates next year with a BS in Geology and I see a very bright future for him. The job opportunities are there! Thanks again.

  7. Don’t forget choosing the right spouse. A divorce can destroy a ton of wealth (if not take your entire life entirely).

    Having an emergency wealth stash so that I can wait until better opportunities come along was helpful (I’ve also created an LOC for additional emergency measures as I’ve kept my credit score up). I think it all comes down to savings and just planning ahead (with the right people).

    With liberal arts degree, there will always be smart cookies in there who will succeed regardless (Her Every Cent Counts) but if you take the median starting salary, it’s quite low – and this would probably have to do with having ‘shovel ready’ market skills. Compare liberal arts median start salary to the median salary of STEM majors like engineering or computer science – the cost benefit would point to one of those STEM degrees since you’ll generally have work-ready skills…

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