As we head into the summer, we are starting a new summer reading series, called Your Financial Roadmap, key questions to consider for every life stage, including your 20s, 30s, 40s, and 50s. We start our series off with your 20s, where you look to build the foundation for long-term financial stability. After all, a few simple moves in your 20s can have a major impact on your long-term financial outlook.
Starting Out Can Be Hard
"I'm 25, barely making ends meet, and everyone keeps telling me I should be investing. How am I supposed to save for retirement when I can barely afford my student loan payments?"
Sound familiar? If you're in your 20s, you're probably asking questions like this. Maybe you're wondering if you should pay off debt first or start investing. Maybe you're not even sure where to begin. Or maybe nobody ever taught you this stuff, and you feel overwhelmed.
Here's what I want you to know: you're not behind. Your 20s are when you build the foundation for long-term wealth, even if it doesn't feel that way.
At LaPorte Financial, we work with families throughout Central Florida at every stage of life. But when I meet with people in their 50s and 60s who are worried about retirement, their number one regret is wishing they had started investing in their 20s.
The good news? If you're in your 20s right now. You have something that people twice your age would pay any amount of money to have again: time.
Let's talk about the questions you should be asking, the moves you should be making, and why starting now, even with small amounts, can set you up for financial success that will compound for decades.
The Questions You're Probably Asking (And the Ones You Should Be)
What You're Asking: "Should I pay off my student loans or start investing?" "How can I save for retirement when I can barely afford rent?" "Do I really need to worry about this stuff now?"
What You Should Also Be Asking: "What habits should I build now that can help make me wealthy later?" "How much will waiting five years to start investing cost me?" "What's the minimum I need to do now to stay on track?"
Both sets of questions matter. The first group deals with your immediate reality. The second group deals with your future reality. Smart financial planning in your 20s means addressing both.
How $500 a Month Could Change Your Future*
Let me show you something that might surprise you.
If you invest $500 a month starting at age 25:
- Total invested by age 65: $240,000
- Value at retirement (assuming 7% average return): $1.37 million
If you wait until 35 to start that same $500 a month:
- Total invested by age 65: $180,000
- Value at retirement: $611,000
By starting 10 years earlier, you invested only $60,000 more but ended up with $760,000 more at retirement. That's the power of compound interest, and it's why people call it the eighth wonder of the world.
But maybe $500 a month feels impossible right now. That's okay. Let's look at smaller numbers.
Starting with just $200 a month at age 25:
- Value at retirement: $548,000
Starting with $200 a month at age 35:
- Value at retirement: $244,000
Even at $200 a month, starting in your 20s gets you more than double the money at retirement compared to waiting until your 30s.
The point isn't to overwhelm you with big numbers. It's to show you that time is your superpower right now, and you don't need huge amounts of money to harness it. After all, you can always increase the monthly amount down the road; what you can't do down the road is start earlier.
*Please note that these are hypothetical examples and are not representative of any specific situation. Your results will vary. The hypothetical rates of return used does not reflect the deduction of fees and charges inherent to investing.
Financial Priorities In Your 20s: What Actually Matters
Priority 1: Stop the Financial Bleeding
Before you can build wealth, you need to stop losing money. That means:
Get out of credit card debt. If you're paying 18-25% interest on credit cards, that needs to be your top priority. You can't invest your way out of credit card debt because you'd need to earn 25% returns just to break even.
Pay attention to monthly payments. Things like student loans and car loans don't usually have high interest rates, but those monthly payments add up, shrinking your monthly budget. Imagine the relief you will feel when you own your car outright or no longer have to pay student loans.
Build a small emergency fund. Start with $1,000. It won't cover everything, but it'll keep small emergencies from becoming credit card debt.
Track where your money goes. You don't need a complicated budget. By tracking your spending each month, you will see where your money is going. And you may be surprised by what you find. Realizing simple things like how much you spend eating out, on clothes, or on streaming subscriptions, you may identify a few areas where you can cut back and find money to pay off debts faster or start investing.
Priority 2: Get the Free Money
Your employer's 401(k) match is free money. If your company matches 50% of your contributions up to 6% of your salary, contribute at least 6%. That's an immediate 50% return on your investment.
Even if you're paying off debt, try to contribute enough to get the full match. This is one of the few times it makes sense to carry debt while investing.
Priority 3: Start Investing (Even If It's Small)
Here's where most financial advice gets overwhelming. People start talking about asset allocation, expense ratios, and investment strategies. Forget all that for now.
Consider Opening a Roth IRA and contribute whatever you can. $50 a month? Great. $25 a month? Also great. The habit matters more than the amount right now.
Keep it simple. Target-date funds or index funds may be a good investment option. No need to get fancy, this is not the time for bitcoin or cryptocurrency, just a basic investment to get you started.
Automate it. Set up automatic transfers so the money goes to your Roth IRA before you see it.
Your investment strategy: Get your employer match first, then focus on the Roth IRA. Since you're likely in a lower tax bracket now than you'll be later, the Roth IRA is usually the best choice after securing your employer match. Once you're maxing out the Roth IRA ($7,500 for 2026), then consider increasing your 401(k) contributions.
Priority 4: Invest in Your Earning Potential
Your ability to earn money is your biggest asset in your 20s. Investing in skills, education, or certifications that increase your income often provides better returns than any investment account.
This might mean taking a course, getting a certification, learning new skills, or even changing jobs. The extra income you earn can fund both your current lifestyle and your investment accounts.
The Mindset Shifts That Will Make You Wealthy
Think in Decades, Not Years
Your 20s are not about getting rich quickly. They're about establishing systems that can help make you wealthy over time. Every dollar you invest now has 40+ years to grow. That's plenty of time to weather market downturns and benefit from long-term growth.
Live on Less Than You Make
One of the most important things you can do in your 20s is build a foundation for long-term financial success, and that starts with learning the importance of having a budget and not living beyond your means. Learning this habit early will pay dividends down the road.
Don't Try to Time the Market
You'll hear people talking about when to buy, when to sell, whether the market is too high, whether a crash is coming. Ignore all of it. You have 40 years to invest. Just keep putting money in consistently, regardless of what the market is doing.
This consistent investing approach is called dollar-cost averaging*. When markets go up, you buy fewer shares. When markets go down, you buy more shares. Over time, this smooths out the ups and downs and helps take the emotion out of investing.
Real Talk: Common Obstacles and How to Handle Them
"I Don't Make Enough Money to Invest"
This is the most common thing I hear from people in their 20s. But remember, it's not about the amount, it's about the habit. Start with whatever you can, even if it's $25 a month. As your income grows, increase your contributions.
Also, look at your expenses. I'm not saying you need to live like a monk, but small changes can free up money for investing. Cancel subscriptions you don't use. Cook at home more often. Find a cheaper cell phone plan. The money is usually there; it's just going to other things.
"The Stock Market Feels Too Risky"
The stock market goes up and down in the short term, but over long periods, it has historically provided consistent returns. Since you have 40+ years until retirement, short-term volatility shouldn't significantly impact your investing. The one exception could be if you are saving money for a down payment on a house.
Actually, market downturns in your 20s can be beneficial. When prices drop, your monthly contributions buy more shares.
"I'll Start When I'm Making More Money"
This is the biggest trap. There will always be a reason to wait. When you're making more money, you'll also have more expenses. The best time to start building the habit of investing is when you have less money, because it forces you to be disciplined. The biggest gift you can give yourself in your 20s is the financial discipline to thrive long-term. Building good habits now will benefit your future self and provide you increased flexibility down the road.
The Central Florida Advantage
Living in Central Florida gives you some advantages for building wealth:
No state income tax means you keep more of your paycheck to invest. That extra money can add up to significant amounts over 40 years.
Lower cost of living compared to many major metropolitan areas means your money goes further. Take advantage of this by saving the difference.
A growing job market provides opportunities for career advancement and income growth. Use this to your advantage by continuously developing your skills.
Why This Matters More Than You Think
Building wealth in your 20s isn't just about having money in retirement (though that's important). It's about having options.
When you have money invested, you have the option to:
- Take career risks because you're not living paycheck to paycheck
- Handle emergencies without going into debt
- Take advantage of opportunities when they come up
- Support family members if they need help
- Potentially retire early if you want to
Most importantly, you have confidence. Money stress is one of the biggest sources of stress in people's lives. Starting to build wealth now could mean less financial stress in the future.
The Bottom Line: Time Is Your Superpower
I know it feels like you have bigger priorities right now. Student loans, rent, trying to have a social life, maybe saving for a house. All of those things matter.
But here's what people in their 50s and 60s wish they could tell their 25-year-old selves: Start now, even if it's small. The money you invest in your 20s will do more work for you than money you invest at any other time in your life.
You don't need to be perfect. You don't need to invest huge amounts. You just need to start.
Remember that saying about planting trees: The best time to plant a tree was 20 years ago. The second-best time is today.
Your future self will thank you.
Frequently Asked Questions
Should I pay off student loans or invest first?
This depends on your interest rate and loan type. If you have federal student loans at 6% or lower, it often makes sense to invest while making minimum payments, especially to get your employer match. If you have private loans above 6%, consider paying those off first. Always get your full employer 401(k) match; that's free money you shouldn't pass up.
How much should I aim to save for retirement in my 20s?
A good target is 10-15% of your income, including any employer match. If that feels impossible, start with whatever you can - even 1% is better than zero. Increase your contributions by 1% each year or whenever you get a raise. By your 30s, you want to be saving at least 15% of your income for retirement.
What's the difference between a Roth IRA and 401(k)? And what about Roth 401(k)s?
A 401(k) is offered by your employer and often includes a company match. Traditional 401(k) contributions are pre-tax (lowering your current taxes), but you pay taxes when you withdraw in retirement. A Roth IRA is an individual account you open yourself. You contribute after-tax money, but withdrawals in retirement are tax-free, provided certain conditions are met. Many employers now offer Roth 401(k) options, which combine the higher contribution limits of a 401(k) with the tax-free growth of a Roth. For people in their 20s, an appropriate strategy may be: get your employer match first, then contribute to a Roth IRA, then back to your 401(k) if you can save more.
Is it too risky to invest in my 20s?
Actually, your 20s are the perfect time to take investment risk because you have 40+ years to recover from any downturns. The bigger risk is not investing and missing out on decades of compound growth. Keep your emergency fund in cash, but your long-term savings should be invested. Consider staring with simple, diversified investments like target-date funds or index funds that spread risk across many companies.
Ready to Start Building Wealth?
At LaPorte Financial, we help Central Florida families at every stage of life build financial confidence. Whether you're just starting your career or want to make sure you're on the right track, we can help you create a plan that fits your life and your budget.
The most important step is getting started. Let's talk about how to work towards turning your financial goals into reality.
*Dollar cost averaging involves continuous investment in securities regardless of fluctuation in price levels of such securities. An investor should consider their ability to continue purchasing through fluctuating price levels. Such a plan does not assure a profit and does not protect against loss in declining markets.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.