Millennials: Invest in this first.

Millennials: Invest in this first.

It’s the most popular question that I have usually had no idea how to answer without sounding like an idiot. Millennials occasionally — I use that word strongly and on purpose — want to know how to invest their extra money (if they have any). Where will they find the best return, what do they need to do to buy that BMW someday, how will they become rich, etc. My most polished answer is that it’s complicated.

Obviously that answer sucks, but there are several things that make the question both loaded and hard to answer…. I’ll explain why shortly. Instead, what I can offer before I give any real financial advice is something completely different and more monetarily effective than any equity, mutual fund, or bond could ever be for my fellow Millennials. Surprisingly, it is an investment opportunity that has almost nothing to do with making more money, at least in the short term.

Millennials need to invest time in finding people that know more about money than they do.

 

Probably not what you were expecting, right? Invest time and effort into something instead of money? Just stay with me here, I wanted to get to the point quickly in this post because it is literally the only reason that I have had any early financial success as a young person.

This is what you need to know:

Financially educated people love sharing their knowledge. Why? Mostly because they are surrounded by people that won’t listen to them, are scared of money and think wealthy people are evil, or will end up completely offended by any advice that they have to offer.

We tend to take our poor financial decisions personally in this country, and I still haven’t quite figured out why. What do you mean I shouldn’t have bought that car that I can’t afford? How dare you tell me that my house is actually out of my price range?! I like going out to eat once or twice a week! I DESERVE IT.

Well, you really don’t. But, you also don’t want to hear about why you don’t deserve it either. You’re an entitled Millennial. You get defensive, and that’s why you won’t be wealthy.

If you can escape this mindset and seek out people that know more than you, it will set you free financially. Seriously. The catch is that you have to listen to them.

Here is the short version of my story.

I graduated from college with a ton of student loan debt and was on the path of every other Millennial that I know. I wanted a $200,000 house (top of my price range), a new car, and lots of nice shiny crap. Fortunately I met some great people that pointed me in a different direction and told me how dumb I was— it was true and I needed to hear it. As a result I was able to pay off my loans and start building wealth pretty quickly as a young person. BAM!

Now let me explain the important part that I just glanced over. I met people that told me things that I didn’t want to hear, but I listened to them. You will meet people that are more financially educated than you just by sheer circumstance, but you have to be able to recognize it and capitalize on the opportunity. If this sounds sneaky or wrong…it isn’t. People that understand money want to talk to other people about it, and won’t fault you for picking their brains. Find these people and ask questions about how they made their money. Now. Your goal is to learn how money works, and then make money work for you.

Bottom line: find financial mentors before you move forward with investing.

OK Millennials, now we can talk about the stuff that you clicked for.

It’s the question everyone has: What do I need to invest my money in? When it comes to investing your hard earned dollars, all Millennials need to realize this:

MILLENNIALS HAVE MORE TIME TO RECOVER FINANCIALLY THAN ANYONE ELSE ON THE PLANET.

You are young. I’ve said it before; no asset is more important than time. If you screw up and invest in the wrong thing, you can recover. Take this into account and use it to your advantage as you start to invest your money. You can take more risk, and you should. The bottom line is that you need to formulate an aggressive investment plan and act quickly.

The beauty of investing is that you can do more than one type of investment at a time in order to mitigate your risk in the long run. For example, my strategy is to invest aggressively in real estate, as well as put a considerably smaller amount of money each month into the stock market (it’s called dollar cost averaging) at the same time. The real estate will allow me to create larger returns in a shorter period of time, while the dollar cost averaging will provide smaller, more stable returns over the long run.

The main point however, is that I have a plan. I would be willing to bet that many of you don’t, so let’s talk about a few things.

You have serious choices to make before you invest a dime.

The following points are why I believe that the “What should I invest in?” question is too broad to answer for Millennials in one blog post. Instead of telling you that you should put your money into real estate or what equities to buy right now, I want you to take some time and think about these things first:

  1. Have you decided what your investment goals are? Do you want to be super wealthy, quit working at an early age, or just have a comfortable retirement after your career is over? This could mean the difference between investing in things like real estate, stock options, mutual funds, or lower yield investments like bonds. There are hundreds of different types of investments, but they all revolve around your investment goals. Luckily for you, I plan to do posts about as many of those investment options as I can. Think about what you want in the mean time.
  2. Have you even thought about your risk tolerance? Do you want to be more speculative or conservative? I would say that you should be more speculative in your younger years, but many people would argue the opposite. You will have to decide what you are comfortable with.
  3. Can you read? Just kidding, but seriously. This may be the most time intensive part of investing. You have to get your mind right before you start slinging your cash all over the place. There are tons of books about investing and wealth building; you should start reading them and treat it like a side job. Find an investment niche that you are interested and absorb all of the information that you can. Blogs like this, internet forums and online magazines are a great place to learn as well. The more knowledge you have, the more money you will make.
  4. How much are you willing to sacrifice your personal lifestyle in order to free up investment funds? Investing only works super effectively if you have the cheddar to do it. Odds are that you don’t make a ton of money yet. Sorry kids. One way that you can create more investment capital is by cutting down on your personal expenses, and using that extra money to invest.

Having answers to questions like the ones above is the first step towards successful investing. I would argue that putting time and effort into figuring out those answers IS an investment in itself. Find financial mentors, learn as much as you can, and decide what you want from investing before you jump in.

Live differently, your bank accounts will thank me later.

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3 comments… add one
  • John Browne May 28, 2016, 2:35 pm

    Umm… Betterment, save up 3,000 and dump it into Vanguard.. BOOM. shut up and let it grow and keep dumping into that over time and let it compound as these things follow the S&P 500. No need to get involved in day trading unless you want to do that, if you want hands off stuff and want to spend your life doing other things. Let your money compound over time as the S&P has a 11% average over the course of its life, sure there are down years and very up years but its the long term we are seeking.

  • TN Sep 20, 2016, 12:23 am

    I think its great that your explaining on ways to pay debt, in general, the truth is, these methods have been around for decades and maybe even hundreds of years, the problem is, Unless people really want to change and make it part of there lifestyle, then really nothing changes to reduce or eliminate debt. Whether its baby boomers, Gen Xers, Millennials, etc.. If you don’t change your perception on money, or have some type of accountability support, a guide, reading a blog, or reading another article on some other site, again it doesn’t matter. I wish life was as cookie cutter as the next couple.

    • Millennial Money Man Sep 20, 2016, 8:14 am

      Absolutely agree – the tools are all out there. Nobody is really saying any new information on paying off debt. A lot of people just need support, guidance, etc.

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