5 Ways to Jumpstart the Wealth Building Process While You’re Young

by / ⠀Entrepreneurship / September 9, 2022
For the vast majority of business owners, building wealth takes time. That's why you want to get started when you're young.

It’s one thing for an entrepreneur to have high hopes and aspirations for their different ideas and startups. It’s another thing to actually see wealth building through your businesses.

For the vast majority of business owners, building wealth takes time. That’s why you want to get started when you’re young.

Here are a few ideas for ways to start building wealth, even if you have limited cash to work with.

1. Take advantage of 401(k) matching.

One of the simplest ways to build wealth is by maximizing your 401(k) matching if your employer offers it.

401(k) matching takes place when your company matches your contributions (or at least a portion of them) to your retirement portfolio. This is often a tiered process that maxes out at some point. Take advantage of it.

401(k) matching is free money added to your paycheck. If you don’t unlock it through the right contribution amount, though, you’ll never see a dime of it. It’s always good to at least maximize your 401(k) contribution matching and add even more to your retirement savings if you can afford it.

With that said, there is one important additional note worth adding here.

Wealth Woman highlights that you shouldn’t contribute more than your match if you plan on retiring before 59 ½. This is because the penalty for an early withdrawal is around 10%. At that rate of loss, it would be better to redirect your investment elsewhere — which leads us to our next recommendation.

2. Invest in stocks.

The stock market can feel intimidating. There are countless factors, from stocks to index funds, options, and more. If you can make sound, long-term stock investments as a youngster, though, they can provide massive payoffs in the long run.

One of the best options for an inexperienced trader is to simply buy the S&P 500 index fund. This is either an ETF (exchange traded fund) or a mutual fund that follows the overall ebb and flow of an entire index. In this case, it’s the S&P 500.

Investor Warren Buffet is famous for touting the resilient, safe, and profitable nature of owning a fund like this over the long-term. In fact, the finance icon has even said that he personally has a tough time beating the index with his own well-informed investment decisions.

If you want to begin building wealth and you’re uncertain how to start in the stocks department, scoop up some shares of an S&P 500 index fund and stow them away.

3. Buy a home with a 15-year mortgage.

Everyone needs to live somewhere, but paying rent is basically throwing your money into a black hole. Sure, you don’t have to worry about things like taxes and maintenance, but you aren’t building any equity (i.e. wealth) — which is why we’re all here.

Instead, you can buy a home. Even with a traditional 30-year mortgage, this can start to build up a little bit of equity for you over the years.

However, if you want to accelerate your younger wealth building, you can also opt for a 15-year mortgage. The payment is often not too much higher than a 30-year alternative. And the amount of interest that you pay over the course of the loan drops off dramatically.

If you want to go even further, you can also invest in other properties. Commercial real estate is particularly profitable.

In the past, the barrier to commercial real estate has always been high. But companies like RedSwan are tokenizing the commercial real estate market. This is making it possible for ambitious new investors with limited funds to get in on the action.

4. Build your businesses.

When you’re older, you’ll have the knowledge and experience to make your businesses thrive.

When you’re younger, though, there are other unique factors that you have going in your favor. You have more energy, drive, hope, and ambition.

Use this intensity to launch different businesses. Will some of the fail? Probably. Fortune claims that 90% of startups fail. It’s a reality that all entrepreneurs must face.

Will you make mistakes even with the businesses that succeed? Absolutely. But you’ll never get anywhere if you don’t start at the beginning.

Use your younger years to invest in your own startup ambitions in the hopes of creating passive income streams to fuel your wealth in the future.

5. Diversify.

As a final note, resist the desire to pour all of your assets into one investment —or even one area. Explore diversification, including Green Card opportunities for entrepreneurs through programs like Visa Franchise. Diversifying your portfolio is key to long-term financial success.

Just because you hit on an altcoin that tripled in value over the past few months doesn’t mean all of your investing should take place in cryptocurrency. The same goes for any item on this list. The more you put your eggs in a single basket, the greater your risk will be.

If you start building wealth when you’re young, you want to both create and preserve it. That means diversifying your portfolio.

There are many different ways to start building wealth at a young age. From real estate to stocks, 401(k) matching to startups, look for the best ways to start your own wealth journey.

Remember to stay diversified as you go along, too. The results will quite literally pay for themselves.

About The Author

Kimberly Zhang

Editor in Chief of Under30CEO. I have a passion for helping educate the next generation of leaders.