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5 Things You Should Know About Money Before You Turn 30

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.” And that’s a big problem.

Nicolas Cole

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Money, and “financial freedom,” is a skill.

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.

  • They don’t know how to make more of it.
  • They don’t know how to spend less of it.
  • They don’t know how (they’ll ever) save it.
  • And they don’t know what to do with it once they have it.

And that’s a big problem.

When I was 23 years old, I sought out a family friend of ours who was a trader—and “money expert.”

We both worked in the West Loop of Chicago, and I asked if he’d be willing to grab coffee (my treat) and teach me a bit about finances.

So one day after work, we met at the La Colombe on the corner. I showed up with probably two dozen questions locked and loaded: what’s an IRA, what’s a 401k, why would I need one, when should I buy stocks, what should I look for in a stock, how much money should I have saved up in my savings account before I start buying stocks, how do I get started in real estate, what’s a “commodity,” etc.

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.

Which is what I’d like to share with you today.

I just turned 29, and these are the things I have taken it upon myself to learn, to practice, to master, and to grow my own personal financial situation. And funny enough, these same principles are what helped me bootstrap and ultimately build a company, called Digital Press.

Here are 5 things you should know about money before you turn 30.

And the sooner you can learn these things, and start putting them into practice, the better off you’ll be in the long run.

1. There are five buckets you should focus on when it comes to building a portfolio for your finances.

  • Cash
  • IRA/401k
  • Index fund
  • Stocks
  • Cryptocurrencies / high-risk investments

In that order.

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. So if you know you spend, say, $3,000 per month—in rent, food, transportation, etc.—then you should have at least $9,000 saved up in your bank account before you even think about playing the game of wealth accumulation and investing.

If you’re disciplined, you can achieve this goal 1-3 years out of college. It just means you might not be able to buy shots of tequila every weekend.

Once you have 3 months of runway saved up (first bucket: cash), then you can move on to the next bucket, which is some sort of long, long term investment vehicle like an IRA account or a 401k if your company offers it.

The reason why I wanted to get started down this path sooner than later was because it’s a vehicle that benefits heavily from the variable of time. The earlier you start, the more years of interest you can take advantage of—which means a bigger nest egg way down the road. So that’s the second “bucket” you want to start putting a little bit of money in.

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.

…and no, this won’t take you forever. For context, I achieved the first few steps here 3 years out of college. I wasn’t rich, but at least I had the right habits trending in the right direction.

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 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.

To start saving cash, I “taxed” myself $100 per month straight into my savings account. And when I set up my IRA account, I “taxed” myself another $50-$100 per month, which automatically pulled from my bank account and went straight into my IRA. And then little by little, as I continued to increase my own personal income, I started taxing myself more, and more, and more.

Today, on the 1st of every month, I have multiple “taxes.”

  • IRA tax
  • Index fund tax
  • Stock tax
  • Cryptocurrency tax

These are all set as automatic withdraws. The money goes out. I don’t see it. I don’t touch it.

And that’s the point.

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 3 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 3-5 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, and the truth is, it really becomes a question of your own personal risk tolerance. However, it’s important to understand how aggressively you can “play the game” before you start pushing your chips into the center of the table.

The way I like to think about it is like this:

A mentor of mine asked me the question, “Cole, what is a life-changing result for you?” For example, if I make $100 because a stock does well, does my life actually change?

Not really.

Okay, what if I made $1,000? Would my life change? Meaning could I make fundamentally different decisions, or approach the game differently because of my acquisition of capital?

Not really. An extra $1,000 means I could take myself on a nice vacation, or buy some new clothes, and that’s about it. But $1,000 doesn’t change my life.

What about $10,000? What about $100,000?

At what point does your life change? Which mile marker? And what scenarios allow you to move yourself closer and closer to that mile marker without putting yourself at dangerous risk?

Like I said, once you have a solid foundation built for yourself in cash and long-term investment vehicles you’re actively adding to, now you can start thinking about how much you’re willing to risk (“How much would you have to lose for your life to change in a negative way?”) in order to participate in the upside of a potentially life-changing result.

For example:

If I invest $100 today, and I lose all $100, my life doesn’t change that much. It wouldn’t feel great, and I’d wish I had my $100 back, but overall everything would remain the same: I could still pay my rent, I could still put food on the table, and I could still go about my day-to-day life without any added stress.

But what if I lost $500? What if I lost $1,000? At what point does my life change in a way that forces me to ask a friend for a loan, or I have to move out of my apartment, or I’m so stressed that my personal life starts to fall apart?

This is how you find your threshold for pain. And the name of the game is always making sure that however much you’re investing is enough to participate in a (positive) life-changing result, but not so much that if things go south, your life “changes” negatively.

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.
  • 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.

I had just started writing for Inc Magazine, and they were willing to pay me per page view on my articles. At the time, I saw this as a golden opportunity for me to not only double down on my craft as a writer, but actually generate a decent bit of side income for myself (considering I was making $15 per hour as a copywriter at the time).

This was a big stepping stone moment for me.

My first month writing for Inc Magazine, I pushed myself to write 1 article per day for 30 days straight—causing me to not only generate several hundred thousand page views for the publication, but actually become one of their highest performing columnists. I got paid something like a penny per page view, so I generated almost $1,000 in extra income for myself that month.

I then went on to do the same thing the second month.

And the third month.

And for almost two years straight after that. By the time I was finished writing for them, I had written over 400 original articles and solidified myself as one of their Top 10 columnists.

Every single dollar I made writing for Inc Magazine, I either saved (reaching my 3-month cash goal) or I invested in my IRA, and then in stocks. I didn’t upgrade my lifestyle. I didn’t move into a nicer apartment (in fact, I still lived in my small studio apartment with this weird fungus growing on my ceiling). I didn’t even treat myself to some new clothes and fresh kicks. I saw this second stream of income as a faucet to feet my financial future—and I treated it accordingly.

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 naïve 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 #3, 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.

Nicolas Cole is the founder of Digital Press, a content marketing agency that turns founders, executives, and entrepreneurs into world-renowned thought leaders. As an author, Cole is a 4x Top Writer on Quora and Top 30 Columnist for Inc Magazine with over 50 million views on his work. His writing has appeared in TIME, Forbes, Fortune, Business Insider, CNBC, The Chicago Tribune, and more.

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