The Best Strategies for Investing in Your 20s

Why Investing in Your 20s Is a Life-Changing Decision

Let’s talk about something that can completely change the trajectory of your financial future: how you invest in your 20s. Most people think they need a high-paying job or a financial advisor to build wealth. I’m here to tell you that’s not true. What you need is knowledge, discipline, and time—and if you’re in your 20s, you’ve already got one of those three working in your favor.

The earlier you start investing, the more you benefit from compound interest, which Albert Einstein allegedly called the eighth wonder of the world. To illustrate just how powerful compounding is, let me ask you a question:

Would you rather have $100,000 today or one penny that doubles every day for 31 days? That single penny turns into over $21 million by the end of the month. That’s the power of time and compounding.

If you start now, even with small amounts, you’ll be shocked at what your money can grow into by the time you retire. So let’s break down the 6 Rule #1 strategies that will put you on the path to financial independence—starting today.

1. Pay Off High-Interest Debt—It’s an Emergency

Before you start investing, you need to tackle something that’s quietly sabotaging your finances: high-interest debt. Think credit cards, personal loans, and high-interest student loans.

The average credit card interest rate in the U.S. is over 22%—that’s higher than the average annual return Warren Buffett gets from his investments. If you’re carrying that kind of debt, it’s compounding against you, not for you.

Debt compounds just like investments—except it makes you poorer.

Let’s say you carry a $5,000 balance on a credit card with a 22% interest rate. That grows to over $36,000 in 10 years if left unpaid. That’s money that could have been invested and compounding for your future instead.

So, Step 1 is simple:

• Make a list of your debts.

• Focus on paying off anything with interest rates above 7–10%.

• Use the debt avalanche or debt snowball method—whichever keeps you motivated.

This is your first investment. It’s a guaranteed return.

2. Learn How to Invest—Don’t Gamble with Your Future

A lot of people confuse investing with speculation. They throw money into stocks without understanding the business, hoping it’ll go up. That’s not investing. That’s gambling.

Rule #1 Investing is about buying wonderful businesses at attractive prices and holding them for the long term. You don’t need a finance degree or a Wall Street background. What you need is clarity on four key principles:

1. Understand the Business – Don’t invest in what you don’t understand.

2. Look for a Moat – A competitive advantage that protects the business from competitors.

3. Trust the Management – They should have integrity and skill.

4. Buy When It’s On Sale – Only buy when the stock is undervalued.

Warren Buffett calls this strategy ‘laziness bordering on sloth’ because it doesn’t require frequent trading—just patience and discipline.

If you learn these principles now, you’ll have a huge edge over your peers who are relying on index funds or financial advisors to do the thinking for them.

And the best part? You can learn everything you need to get started in just a few days. I’ve taught thousands of students through our Rule #1 Workshop, and they’ll tell you—this isn’t rocket science. It’s just smart money thinking.

3. Open a Roth IRA—Your Tax-Free Wealth Engine

If you’re in your 20s, the Roth IRA is one of the greatest tools at your disposal. Unlike a traditional IRA or 401(k), where you pay taxes later, the Roth IRA allows you to pay taxes now—when your income and tax rate are low—and withdraw all your gains completely tax-free in retirement.

Let’s break it down:

• You can contribute up to $7,000 per year (as of 2025).

• Investments inside a Roth grow tax-free.

• Withdrawals in retirement are 100% tax-free—no matter how much you’ve earned.

Take the story of billionaire Peter Thiel. He invested $2,000 in a Roth IRA and used it to buy shares of private startups like PayPal and Facebook. Today, his Roth is worth over $5 billion, and he’ll never pay taxes on it.

Even if you don’t have a unicorn stock pick, a well-managed Roth can still grow into millions if you start early and invest wisely.

4. Budget Like a Pro and Pay Yourself First

Budgeting might sound boring, but it’s a cornerstone of wealth-building. Especially in your 20s, when it’s easy to overspend on rent, food delivery, or the latest tech gadget.

Here’s what most people don’t realize: $1,000 invested today at 15% returns annually becomes over $267,000 in 40 years.

That’s why every dollar you save now matters exponentially more than dollars you save later in life.

Pay yourself first by automatically sending a portion of your paycheck to your investment account before you spend anything else.

Here’s how to make it work:

• Create a bare-bones budget to identify your needs vs. wants.

• Aim to save at least 10% of your income, more if you can.

• Automate it—have your Roth funded directly from your checking account.

It’s not about being frugal forever. It’s about buying freedom and options for your future.

5. Don’t Just Set Goals—Make a Promise to Yourself

Goals are great. But without commitment, they often stay dreams.

When I started investing, I didn’t just say, “I want to be financially free someday.” I made a promise to myself:

“I will achieve financial independence in five years.”

That promise changed everything. It forced me to act differently. I stopped thinking like an employee and started thinking like an investor.

So, make a promise:

• Decide how much capital you want to build by age 35.

• Use a 15% compounding return as your baseline.

• Work backwards to determine how much you need to invest each month.

Let’s say you earn $60,000/year and invest $500/month at 15%. In 10 years, you could grow that into $140,000—and $15 million by retirement if you keep it up.

The formula is simple. The commitment is what makes it real.

6. Start Now—Time Is Your Most Valuable Asset

This is the part I want to drive home more than anything else:

The most valuable thing you have in your 20s is time.

Compounding is exponential. The longer your money compounds, the more wealth it creates in the final years. That’s why starting even five years earlier can result in millions more in retirement.

Every dollar you don’t spend on something short-term now is a future dollar that can multiply for decades.

You don’t need to start big. Start now. Start small. Start smart. Just don’t wait.

Related Post: The Power of Compound Interest: How to Supercharge Your Retirement with Rule #1 Investing

Final Thoughts: You’re in the Driver’s Seat

If you’re in your 20s, you’re in a position most people would kill for. You have the one resource no amount of money can buy—time. Don’t waste it.

Here’s your Rule #1 investing roadmap:

• Eliminate high-interest debt

• Learn how to invest using Rule #1 principles

• Open and fund a Roth IRA

• Budget with purpose and pay yourself first

• Make a clear financial promise

• Take action now—no excuses

And if you want to learn the Rule #1 strategy step by step, with coaching and real-world guidance, join me for our next workshop. It's three days that could change the next 30 years of your life.

Reserve your spot – space is limited.

**Editor’s Note: This article was originally published in 2018 and has been significantly updated in 2025 to reflect current examples and Rule #1 investing insights.