At only 25, Queenie Tan has a net worth of 494,899 Australian dollars ($357,026), which she built along with her 30-year-old partner Pablo over a span of six years.
Her net worth was more than A$500,000 before the stock and cryptocurrency markets underwent a major correction in January.
“The first A$100,00 was the hardest and took 33 months to achieve. However, the last A$100,000 only took us five months to achieve,” says Ms Tan, who lives in Sydney, Australia.
“I think it goes to show that once you gain momentum, it gets easier and easier to build wealth.”
Ms Tan's investment portfolio includes exchange-traded funds worth A$158,135, stocks valued at A$31,419, a variety of cryptocurrencies worth A$19,925, cash savings of A$61,947, other assets amounting to A$4,086 and a superannuation retirement fund estimated at A$71,906.
She and her partner also own a two-bedroom apartment in Sydney worth A$625,000. Her liabilities, including a mortgage, are estimated at A$477,519.
Ms Tan is a member of Generation Z, those born between 1996 and 2016, who are expected to be the “most disruptive generation ever”, a 2020 Bank of America report showed.
Gen Z’s economic power is the fastest growing across all generational cohorts and their income is expected to increase five-fold by 2030 to $33 trillion as they enter the workplace, accounting for more than a quarter of global income and surpassing millennials’ income by 2031, BofA said.
“I got my first job at McDonald's when I was 14. I started working early because I wanted to have my own money to use for entertainment and didn’t have an allowance or pocket money. I’ve been working ever since,” Ms Tan says.
She started investing at the age of 20 in a robo-adviser, which placed her money in ETFs, gold and bonds. After one year of using the robo-adviser, Ms Tan and Pablo decided to learn more and started investing in ETFs themselves.
“I read the book Rich Dad, Poor Dad and it opened my eyes and made me realise that I wanted to build wealth. After that book, I started to read other personal finance books such as The Barefoot Investor and The Millionaire Next Door and it inspired me to take my finances more seriously,” Ms Tan says.
The couple have set themselves a target of A$1.5 million to attain financial independence and fully retire.
However, they currently have sufficient passive income from their investments and business to fund some of their lifestyle expenses, which still need to be supplemented with active income from their jobs.
“But having the passive income takes the pressure off work and it has enabled us to quit our jobs and work full-time creating content on YouTube, TikTok and Instagram,” Ms Tan says.
“We mainly prioritise spending our money on travel and experiences because it brings us the most joy. We’re going on a round-the-world trip from June to September, which will be expensive, but it will bring us many memories.”
Ms Tan and Pablo also aim to die with $0 to their names, “which means we would like to spend all of our money before we die”, she says.
“We will spend our money on experiences, travel, give to family, friends and charity and, hopefully, we will be able to die with $0 or as close as we can.”
She recommends people in their 20s live below their means. Spend on the things you enjoy and cut costs on what doesn't bring you happiness or value, Ms Tan says.
“Start employing your money and get it working for you by investing it. Saving and building wealth is important, but remember to enjoy your life as well.”
To make money, one needs to get out of debt, says Vijay Valecha, head of investment at Dubai-based Century Financial.
Debt can snowball and nullify gains, so it should be a priority — especially credit card debt. The average interest rate for a credit card is 14.75 per cent, but it’s possible to have interest rates in the 20 per cent or 30 per cent range, he says.
It is also important to look at ways to consolidate your debt so you end up paying a lower interest rate, says Aman Moti, a wealth adviser at Holborn Assets.
“Consider creating a monthly budget that factors in basic expenses, such as rent or mortgage, food and entertainment, along with allowances for unexpected expenses,” Mr Valecha says.
“Also, set up a separate bank account that holds at least three months’ worth of savings in case of an emergency. Making automatic monthly deposits to that account is an easy way to force yourself to save.”
He also advises people in their 20s to resist the urge of wasting money on lifestyle upgrades. New cars and larger apartments are not essential if you want to increase your net worth, he says.
“High income must not be nullified by steeper expenses. Keeping the cost of living low for the first few years even after one starts making good money is the way to go. Minimise the 'big three' expenses of housing, transport and food,” Mr Valecha says.
He also recommends analysing your risk tolerance and to invest accordingly. While investing in stocks and equities-based mutual funds can carry a risk of fluctuating values, they can potentially offer positive long-term increases in returns, he says.
Shashwat Phumbra, a 29-year-old Indian based in Dubai, who has an eight-figure net worth, built his wealth mainly through trading and investing in stock markets.
“I’ve always valued freedom the most. I try to take the onus for my situation, whether good or bad,” says Mr Phumbra, who declined to specify the exact amount he has saved and invested.
“To be really independent, financial independence is arguably the most important factor.”
He started trading and investing in equities at the age of 19 while attending university. Since then, he has worked as an investment banker, consultant and equity analyst. He passed the Chartered Financial Analyst level 2 exams a few years ago.
Mr Phumbra, who says he has attained financial freedom, recently started a hedge fund, in which he invests his capital along with third-party funds.
“Most people think that financial independence can be achieved by increasing one’s income. However, it is more important to be conservative with your spending and lifestyle habits. Financial freedom for me is when your income is far above your expenses and you are doing your business or job because you still want to,” he says.
Despite investing 95 per cent of his wealth, Mr Phumbra says he never uses it for his lifestyle expenses.
“Sure, it feels good at times not having to worry about expenditure but mostly it feels the same, if not more stressful,” he says. “Annual returns from investing and trading is one of the most unpredictable things and I do not advise anyone to rely on it for their lifestyle.”
Mr Phumbra urges people in their 20s to read The Psychology of Money by Morgan Housel, which is “a relatively easy read”. He is also inspired by former F1 racing driver Michael Schumacher, billionaire investor George Soros and Elon Musk, the world's richest person, with a net worth of $220 billion.
“Be glad to make mistakes early on in your career. The more mistakes you make in your 20s, the better. You’ll end up learning a lot more from them. The ability to make mistakes reduces with age and responsibilities,” he says.
6 tips to grow your net worth in your 20s
1. Budget
Budgeting is crucial to achieve any financial goal, experts say. Start by applying the 50:30:20 rule, in which 50 per cent of your income goes to necessary expenses (such as food, transport and rent), 30 per cent towards personal expenses (such as entertainment and travel) and 20 per cent towards saving.
If you pick up this habit early on, it will be easier for you to manage your expenses at a later stage when you’ll have more responsibilities, says Ramzi Khleif, general manager of digital wealth management business StashAway Mena.
2. Increase your income
People in their 20s must also focus on increasing their income, says Mr Moti. The higher income you have, the more money you will be able to save, which can then be invested to create a passive source of income.
One popular method is to start a side hustle. This has been very popular with Gen Z, he says.
3. Take risks
Twenty-year-olds should not be afraid to take risks. “If you have a start-up idea in mind and you think it has a huge potential, work towards it,” Mr Khleif says.
Follow the cryptocurrency market and invest in it as long as you have a long-term view. However, invest no more than 10 per cent of your net worth in cryptocurrencies, he says.
4. Cut back on expenses
Young people must be frugal on how they spend money and always ask themselves if they really need something before making a purchase.
“Consider having a roommate for the first few years as it will help you cut back on bills. Try to cook at home most of the time as it will help you save a significant amount of money,” Mr Moti says.
5. Invest
Don't just save and sit on your cash — invest it, experts say. Investing money is much more rewarding as it will generate returns, Mr Khleif says.
“At a young age, time is your best friend. The power of compound interest can grow your money very fast if you invest early on and be disciplined and systematic about it,” he adds.
6. Read and keep learning
Self-growth and improvement should be the biggest goal in your 20s, Mr Moti says.
Acquire as much knowledge as you can and keep learning new skills, which will benefit you and your finances. An investment in yourself will pay the highest dividends in the future, he says.
“The most high-income jobs and their companies require an MBA or a certain certification [CFA or CPA, among others], so consider expanding your knowledge and qualifications,” Mr Khleif adds.
