With disposable incomes at their lowest ever, it seems that many in their early 20s are just ‘living hand to mouth’, and the chance to afford things like owning a house and investing is fading by the day. While there are economic challenges to be faced like low disposable income and unemployment in places like Africa this article aims to help those looking to at least start small and cultivate the right habits while they work through their 20s to raise their income.

In the world of personal finance discipline, the focus is usually on becoming frugal and containing expenses with not much discussion around investing. Most view personal finance from this lens;

However, this approach may be limiting our potential for long-term wealth creation. It's time to shift our perspective and introduce a more deliberate and proactive strategy: treating investments as a crucial part of our financial equation.

Our idea is simple even with little left after paying your bills, you must always be thinking about how much you’re allocating to investing. It can’t be left as something you’ll do ‘when you get rich’.

How we view investing

Instead of the traditional income - expenses = savings, consider this approach:

By treating investments as a separate category, distinct from both expenses and savings, we create a mindset shift that prioritizes wealth-building alongside day-to-day financial management. We’ll discuss more below on why this approach matters, first let’s look at how we can apply it in real life.

How to Implement this approach

To help you get started, we've created a basic spreadsheet finance tracker. It’s simple and easy to use with no complicated formulas, automation or visuals.

The first step is making a simple addition to how categorise our income, essential expenses and discretionary spending. We treat investments as a non-negotiable "expense" in your budget, allocating a fixed percentage or amount each month.

The second step is diversification. The reason the investment category is made separate is to stand out and track how much you are allocating to the different types of investments you’re in. This way one can consciously think about which investments they’ve been funding a lot more recently (at a personal finance level, investments are usually subcategorized by asset classes, i.e. stocks, bonds, businesses, real estate, commodities, etc.).

The last step is to regularly monitor your investments' performance, understanding that short-term fluctuations are normal in long-term wealth building. (We won’t provide a template for this, it’s much more complex and is a topic for another article and quite broadly involves understanding what your investment strategy and objective is.)

Why this approach is useful.

It seems like a simple adjustment but One of the most compelling reasons to adopt this continuous and frequent investment strategy is that the barriers to entry for investing have never been lower. This makes it an ideal approach, especially for those in their 20s, whether still in university or just starting their careers.

Gone are the days when investing was reserved for those with high incomes or substantial capital. Today's financial landscape offers numerous opportunities for everyone to start building wealth, regardless of their current financial situation

Many investment platforms now allow you to start with as little as £10 or even less. You can now invest in expensive stocks by buying fractions of shares, making diversification possible even with small amounts. Many brokers (i.e. investment platforms) offer commission-free trades, reducing the cost of frequent investing. Many of these platforms have eliminated minimum account balance requirements, allowing you to start with whatever you can afford.

Some investment platforms in the UK & South Africa

Some UK banks allow you to set up investment sub-accounts linked to your main account. You can set up automatic transfers from as low as £10 per month to your investment account. Many platforms offer stocks and shares ISAs, providing tax-efficient investment options.

This accessibility is particularly beneficial for those in their 20s. Even small, regular investments can grow significantly over time due to compound interest. Regular investing from a young age instills financial discipline that will benefit you throughout your life.

By leveraging these low-barrier entry points and user-friendly platforms, you can start your investment journey now, regardless of your current income or financial situation. Remember, the goal is to start small to build the habit and understanding of investing. As your income grows and your financial situation improves, you'll already have the foundation and experience to make more significant investments.

Disclaimer

This website and all materials contained herein are issued by Regal Capital Botswana (Pty) Ltd ("Regal Capital") for informational purposes only and do not constitute investment advice, a solicitation, or an offer to buy or sell any financial instruments. The content is general in nature and does not consider specific investment objectives, financial situations, or individual needs. While Regal Capital strives for accuracy, no representation or warranty, express or implied, is made regarding the completeness, reliability, or accuracy of the information. Any opinions or estimates reflect the author’s judgment as of the publication date and are subject to change without notice. Regal Capital, its affiliates, directors, employees, agents, or contractors shall not be liable for any direct, indirect, or consequential loss or damage resulting from the use of or reliance on this website. Users should seek independent financial advice before making any investment decisions.

All intellectual property rights in this website are proprietary to Regal Capital or authorized third-party sources. No content may be reproduced, distributed, or transmitted without prior written permission. Investing involves risks, including potential capital loss. Past performance is not indicative of future results, and investments in foreign currencies are subject to exchange rate fluctuations. The strategies or instruments mentioned may not be suitable for all investors.

By accessing research materials, users acknowledge that Regal Capital and its affiliates may hold positions in securities discussed. Research is provided “as is” without warranties of accuracy or completeness and should not be considered a recommendation or solicitation. Users are encouraged to conduct their own due diligence and consult financial, legal, or tax advisors. Regal Capital is not liable for any trading losses, lost profits, or other damages resulting from reliance on its research. Use of this website is governed by the laws of Botswana, and users agree to the jurisdiction of its courts for any disputes.