No one ever tells you what you should know about money when you’re young. There isn’t a class in high school, or even college, where a professor sits you down and says, “Now listen up: mastering money is no different than learning how to shoot a basketball or paint a picture. It just takes practice.”
Instead, money remains (for many people) this massive unknown in their daily lives. When I was 23 years old, I sought out a family friend of ours who was a trader—and “money expert.” One day after work, we met at the La Colombe on the corner. For probably two hours, I asked him every single question I could think of—and he started to realize that what I needed, more than anything, was a foundation of working knowledge.
Here are five things you should know about money before you turn 30.
1. There are five buckets you should focus on when it comes to building a portfolio for your finances (in the following order)
Cash
IRA/401(k)
Index fund
Stocks
Cryptocurrencies / high-risk investments
One of the first “rules of thumb” I was given was that you should, first and foremost, have three months of expenses saved up and tucked away in your savings account. If you’re disciplined, you can achieve this goal one to three years out of college. It just means you might not be able to buy shots of tequila every weekend.
Once you have three months of runway saved up (first bucket: cash), then you can move on to the next bucket, which is some sort of long-term investment vehicle like an IRA account or a 401(k) if your company offers it. The earlier you start, the more years of interest you can take advantage of—which means a bigger nest egg way down the road.
The third, then, is a middle ground between a retirement account and something a bit higher risk, like buying stocks yourself. The easiest bet here is to just put a little bit of money away each month into an index fund. This is another vehicle than benefits heavily from the variable of time, so if you have both a retirement account and an index fund accruing interest over 30, 40, 50 years, that can pay off big time for you down the road.
Once you have cash, retirement, and long-term savings all in progress, then you’re in a position to start “playing the game” of higher risk investing. This would mean buying stocks yourself (using an app like Robinhood, for example), or trying your hand at buying Bitcoin or Ethereum. But the whole idea here is to set you up for long-term success—not fleeting gains.
2. The fastest way to start saving and investing money is to “tax” yourself
When you’re trying to build wealth for yourself, habits are more important than “quick, high-yield investments.” One of the first things this family friend said to me (as a wide-eyed 23-year-old trying to get rich) was, “Cole, you’re not a day trader. So don’t try to be.”
His point was that trading, picking stocks, and even this larger concept of “making money fast” was the wrong way of going about things. He explained that so many people make the mistake of trying to hit home runs, when in reality, you’ll outperform the vast majority of people by treating your finances in a disciplined way.
The best way to do this—which I got from Kevin O’Leary’s book, Cold Hard Truth On Men, Women, and Money: 50 Common Money Mistakes and How to Fix Them—is to “tax yourself.”
In his book, O’Leary explains that so many people really struggle to save or invest money because they live in a constant state of thinking they don’t have enough money to begin with. They feel like they can barely pay their rent and afford basic living costs and couldn’t fathom saving even $50 or $100 per month. I would know, because when I first read this book, I was living in a studio apartment in downtown Chicago the size of a walk-in closet, and I was making just above minimum wage.
But O’Leary’s point was that if the government one day decided, you know what, we’re going to tax everyone an extra $100 per month, then somehow, some way, you would figure out how to pay that. You’d pick up a side hustle. You’d eat out a few less times. You would pay that extra $100 to the government—so why not self-impose that same tax and pay yourself?
So, that’s what I did—and I’ve been doing it ever since.
3. Life is a game of accumulating and deploying resources—which means you never want to “risk” more than you’re willing to lose
This is a big mental shift that took me a while to learn.
The way that people build true wealth for themselves is they see money differently than everyone else. They don’t see it as something they “have”; they see it as something they deploy and use to build and grow from there.
Once you have your three months of runway saved up in cash, and you have set up recurring “taxes” on yourself to start feeding your long-term investment vehicles, now you’re ready to start playing the game of investing.
Some people like to play it safe and just buy stocks of trusted companies. Others like to throw a little bit of money at companies they think have potential for a lot of growth over the next three to five years. And some people really like to try their hand at forward-thinking companies and trends (like cryptocurrencies) and are willing to accept the risk that comes along with those potential gains.
Here’s the thing: All of these approaches to investing are viable, so it really becomes a question of your own personal risk tolerance.
4. If you want to increase the amount of money you can deploy into investments, build other streams of income.
There are only two ways to increase the amount of resources you have to “play with”: Make more money, or spend less money. That’s it.
Ideally, you always want to find ways to do both of these things at the same time. For example, every month I do a quick audit of my credit card statements to see which recurring charges I’m not using anymore, or which “bad habits” (like eating out too often) have crept back into my daily routine. I look for ways to cut back my spending, and then the next month, I try to put those positive habits into place again.
But the moment I started to really be able to save more money as a 25-year-old, and even get started investing, was when I successfully built a secondary stream of income for myself.
5. Participate in other investments like real estate or angel investing once you’ve built the above habits into your daily life
For years, I’ve asked myself, “When should I get into real estate? When can I start playing the angel investing game?”
The truth is, both these games are advanced styles of wealth accumulation—and require a vastly different level of expertise. It’s naive to think you can just start investing in real estate or playing the role of “startup angel investor” with minimal capital and no working knowledge. Instead, you should be more focused on building a strong financial foundation for yourself—and one that will allow you to play these riskier games without losing your tail.
Now, is it possible to skip right into the real estate game?
Sure. But that hasn’t been my path, and that hasn’t been the path recommended by people much wealthier and much further along than me.
Instead, every piece of advice I’ve received—from real estate investors owning huge portfolios of rental properties to angel investors that have participated in massive success stories—has been to master the basics before you start writing $25,000 checks to early-stage startups or trying to buy a home or rental for a “steal.” And the reason is because these games, although they can certainly be huge variables in building wealth for yourself, are also riskier for a reason. That’s the trade-off. Higher risk but higher reward.
So, going back to point number three, you want to play these games once your threshold for pain is higher. If you lost $25,000 tomorrow, would your life change negatively? If the answer is an overwhelming, “yes,” then you’re not ready to play that game.
