In your 20s is when the net worth of your peers starts to radically change and grow. Those that were born poor are no longer poor and those born rich may not stay rich.
There are two major factors on how your net worth grows. One is whether you take a safe and secure 9-5 job or take the risk going self-employed with hope to make more. The other major factor is whether or not you received financial support – usually from family. However, government support exists for those without family financial support, as long as your family doesn’t make too much money. If your family makes a lot of money and they are unwilling to help pay for education for example, you are SOL and fall into the category of no financial assistance. If you are able to get financial support from family, you will be further ahead than your peers – obviously. In this article, I’m going to graph the 4 combinations of the above factors.
Situation A: No Financial Assistance, Take 9-5
Assuming you were not given money from your parents to get you a head start on life, and you decide to avoid risk of starting your own business, you’ll have a slow linear growth until you enter the work force full-time and then your net worth will stay on linear growth at a higher rate for the remainder of your life.
Situation B: No Financial Assistance, Start Company
This is where I identify. I was born into wealth, but never got breaks that you’d typically expect. When compared with kids from families of similar wealth – I paid for my 3 vehicles, gas and all the insurance associated. Throw in my boat, side by side, dirt bike – you name it. I wasn’t given assistance on a house. Essentially, if I couldn’t pay for it with my own dollar, I didn’t buy it. In the short run your life won’t be glamourous. You’ll have some fun because you feel you deserve it after working double the hours of anyone else, but real money won’t start until your primary project has mature success. This could be in your 30s, or more likely your 40s or 50s.
Situation C: Take Financial Assistance, Take 9-5
If you’re in this path, you’re basically just following the path that was laid for you. It’s simple living, stress free. You will rarely have debt in your own name. Life will be very easy, but rewards will also be limited until your inheritance starts to trickle down in your 50s if it’s available.
Situation D: Take Financial Assistance, Start Company
This is obviously the most optimal position you can be in. These are people like Mark Zuckerberg and Bill Gates. Born to doctors and attorneys, sent to Harvard and take the risk to start a business with the resources they’re given and succeed massively. Of course success isn’t guaranteed, but with startup resources, it’s much more likely than those in situation B. Your net worth is consistently ahead of those in situation B and your company also succeeds earlier thanks to financial assistance.