Mindy Jensen: Imagine you’re 25 years old and just starting out completely from scratch. No savings, no investments, $0 in the bank. What would you do first? Today we are hitting the reset button and building our financial lives all over again. Here’s exactly what we would do if we were starting out at age 25 with $0 to build wealth and reach financial independence as quickly as possible. Hello, hello, hello, and welcome to the BiggerPockets Money Podcast. My name is Mindy Jensen, and with me today is my co-host Evan Lawler.
Evan Lawler: Hey Mindy, I’m so excited to be here today and talk about this circumstance. I think a lot of people are in their mid-20s considering financial independence, wondering what to do. So I think this can be a really helpful conversation for them.
Mindy Jensen: So Evan, remind everybody how old you are.
Evan Lawler: I am 26 years old. So not the 25-year-old we’re talking about today. I can hardly even remember back when I was 25 years old.
Mindy Jensen: Oh, well, try real hard. So Evan, what would you first do if you were starting over today with $0, making your current salary and wanting to reach financial independence?
Evan Lawler: Yeah, I think that’s such a good question. And you finished it with such an important first step, which is defining like, what exactly is your goal, right? You’re someone who wants to pursue financial independence. Well, okay. There’s a spectrum of financial independence now, all the way from Coast FI, maybe on one end to true Lean FIRE or Fat FIRE, where like you have this huge portfolio. So kind of defining what is your goal, or at least your operating goal that can change in the future. But what are you pursuing now? And then next, it would be kind of like understanding your income and your expenses, specifically the big 3 that we always talk about: housing, transportation, and food. Those can really move the needle as far as savings rate. And depending on where your goal is of traditional FIRE or Coast FI, that can define your savings rate as well. And then I think it’s about starting small. So working towards that first $10,000 saved, building up that emergency fund or cutting back in a monthly expense, something that kind of like builds your confidence. Like, hey, I have a vision of what I want to do with my financial future, and I can take action today to start working towards that vision. It’s like going to the gym for the first time or something like that. It can really build a lot of confidence. And then from there, I think it’s working through a stack of optimized steps that we’ve talked about in the past and we can get into today.
Mindy Jensen: Yeah, Evan, you hit the nail right on the head when you said, define what it is you’re working towards. I think a lot of people want to be financially independent, but which one? When we first started pursuing financial independence, there was only one. It was full FI. All of your expenses were covered by your investments and you didn’t have to work anymore. And I love that they have layered in all of these different opportunities to be financially independent at different times with different money goals. Because when I first started, the goal was to invest to get to $1 million. That’s a big number, and that can be a little daunting. Your goal is very different and far more achievable. And I love the Coast FI idea. So yeah, if you’re in your 20s, maybe first focus on Coast FI, define what your Coast FI number is going to be, and then start working towards that. The expenses. Oh my goodness. Whenever anybody asks me, how do I fix my finances? I’m like, where’s your money going? I mean, I pay my rent and, you know, groceries and utilities. Okay. Do you go out to eat? Well, yeah, sometimes. Do you go out to eat for lunch? Oh yeah. I always go out to eat for lunch. Okay. Where else is your money going? Well, I’m not really sure. Track your expenses. Track every dime that comes out of your pocket and gets spent. And when I did it, I wrote it down by hand, and the act of writing it down by hand, it’s kind of a pain, but that is the purpose. You want to be so focused on where your money is going that you’re writing it down and you’re figuring it out. And you’re like, oh my goodness, look at all of these. Like every morning I get coffee and every afternoon I go out to lunch with the people from my work. And every evening I stop at the bar and have a beer on the way home. And every, every, every, every adds up to you have no money. Tracking your expenses is probably the number one thing that I am going to recommend after you have already figured out what your goal is.
Evan Lawler: Yeah. And it’s funny you mentioned writing it down. I did the exact same thing when I first came out of school. You know, we have all the budgeting apps in the world, all the spreadsheets in the world. But what I started with was I bought this little like budgeting book. It was like themed. I forget what the theme was, but each month, you know, it had all these like expenses, right? And it had the categories like, health expenses, food expenses, insurance expenses. And I’m looking at it like, okay, I wasn’t really thinking about all of those expenses. And, you know, in your head, you know, maybe something is like roughly $50, but then you write it down and it wasn’t $50, it was $73. And the other thing that you thought was about $100 wasn’t $100, it was $132. And so you add them together and it’s like, oh, that’s how these expenses kind of grow over time. And so, yeah, I think that’s a great first step. Not only because it’s a practical first step to understand your expenses, to build your savings rate and work towards your goals, but I think that it gives you a sense of control that you’re kind of like, okay, this is what’s coming in. This is what’s going out. Here’s where I’m starting at. Now I can move forward.
Mindy Jensen: Evan, I love that you said that, oh, it wasn’t $50, it was $73. You get it in your head that something costs X when it really doesn’t, or it comes out a little bit higher. And if that’s just one expense, whatever, like, oh, I’m going to the grocery store, I’m going to spend $50, but I spent $100 because, you know, chicken was on sale and now I don’t have to buy chicken for 3 months. Okay, but that, you didn’t spend $50. You spent $100. Another thing that really sneaks up on you is the annual expenses or semiannual expenses. I wrote an article for the BiggerPockets Money blog called Your Budget Has a Blind Spot, and it shows up every December. And you can find that at biggerpocketsmoney.com/your-budget-has-a-blind-spot. And I’m talking about, most people make a monthly budget, but your car registration is once a year. Your homeowner’s insurance is once a year. If you don’t pay it through your mortgage payment, your renter’s insurance is once a year. And you might not remember these things because they get paid in January and you’ve decided to make your budget in October. All of a sudden you’re getting hit with this big expense and you’re like, oh, you need to either budget for it in your month that you’re paying for it, or more likely budget every month. What do we say? Your renter’s insurance is $100 a year. That’s $8 a month. Put that into your renter’s bucket. And then when it comes time to pay it, it’s already funded. You’re not scrambling for that $100. Or like my car registration is like $500. If I don’t have $500, I’m scrambling for it or putting it on a credit card.
Evan Lawler: Yeah. So Mindy, you know, our 25-year-old with $0, they’ve started to look at their expenses. They feel they have a strong understanding of what’s coming in and what’s going out on a month-to-month basis, including all of those annual expenses. What’s after that? What do they start doing next?
Mindy Jensen: Well, hopefully there will be a gap between what’s coming in and what is being spent. And that gap will be a positive gap, not a negative gap. In that positive gap, we want to start saving for our future and investing. And the first thing that you’re going to want to do is save a $1,000 emergency fund. This is your starter emergency fund. It’s going to get bigger, but we want you to have a bare-bones emergency fund. So if something happens, you are not completely derailed. A set of tires is going to be what, like $800? So boom, your whole emergency fund is gone if you haven’t budgeted for your tires. And actually, I don’t even know how much tires cost because I haven’t put tires on my car in a while. Better get that tire budget back up. I want you to have a $1,000 emergency fund so that you are okay in a small emergency. And then I want you to tackle any bad debt you have, any high-interest credit card debt, any interest that is over 8 to 10% or higher. I want you to work very diligently on paying that off before you do anything else, before you are investing. Unless your company has a 401(k) match plan, I want you to stop right here in our order of operations and attack that debt until it’s gone. But then after your debt is gone, or if you have no debt and you’ve built your $1,000 emergency fund, I want you to invest in your 401(k) through your company enough to get the total match if you have one. Not every company offers a 401(k) plan and not every company has a match plan, but if yours does, you should absolutely take advantage of it. And the same goes for your employee stock purchase plan. Evan, does your company have an employee stock purchase plan?
Evan Lawler: They do have one, but it’s not great. It doesn’t offer the kind of flexibility that can make these plans really powerful.
Mindy Jensen: Today, Scott often talks about his first company had an employee stock purchase plan. Scott could buy his company’s stock at a 15% discount today and then immediately resell it. That’s a 15% bonus, but he had to plan over the course of the quarter to put the money into the stock purchase plan. And then at the end of the quarter, he could buy it and sell it. Now that I say all that, maybe it was the next day that he could sell it. Either way, he could sell it very quickly after he bought it. You should reach out to Scott if you want more details about his employee stock purchase plan, because that one made sense. Yours, it doesn’t make sense to invest in. Then you would also skip over this one and move to fully fund your emergency fund. Evan, is your emergency fund fully funded?
Evan Lawler: I have a fully funded emergency fund. Yeah, I actually exceed the 6 months. At first I started with 3 months, grew it to 6 months, and now I’m actually trying to work towards a goal of saving up a year of emergency savings.
Mindy Jensen: And what does emergency savings mean to you specifically?
Evan Lawler: Emergency savings is typically qualified as like a multiple of how much you spend each month. So if you spend $2,500 per month, 3 months of savings would be $7,500, right. And so that emergency savings is set aside. It’s not invested. It’s in cash or a cash equivalent, like a high-yield savings account or a money market account to gain a little bit of interest, but it is sitting there for the bad times, right, for when the rain comes. Right. And it’s set aside for the not regular car maintenance. Right. But like the big car problems that you don’t expect, right. If you own a house, you know, the water pipe bursts, right. Things that are really unexpected, that you would really qualify as an emergency.
Mindy Jensen: And let’s play pretend for a minute, Evan. Let’s say you’ve got your 6 months of emergency fund and all of a sudden you need to drop a new engine into your car. Let’s call it $3,000, cuz I have no idea how much an engine costs. And now your $10,000 emergency fund is actually only $7,000. Would you build that back up before you continue down the order of operations?
Evan Lawler: Yeah, that’s such a good question. And it stinks when an actual emergency comes up. I heard someone say once, like, their emergency fund, that’s not for spending, that’s for looking at. Right. But like, when you have an emergency in life, you have to give yourself a little bit of grace and say, okay, I have to pull from this emergency fund. But yeah, I would just kind of then take a little bit of a step back. If you have, like, you’re investing on top of that employer match, and, you know, if you feel that you’re in a comfortable space, whatever the emergency was, it’s not something that you expect to reoccur, then just kind of work back, take a couple steps back and start to build up that emergency savings again, month by month.
Mindy Jensen: Yeah. It’s so much easier to pull out of that one account that has money in it than to swipe your credit card and worry about where you’re going to pay that bill from.
Evan Lawler: When you started these steps, I had 2 points that I wanted to talk about. First off, you said something that I was just going to brush over, but it’s so important, is that when you’re looking at your income and expenses, you have a strong understanding of what that is. You got to make sure that your income is above your expenses, right? And it’s such a simple idea, but it’s so important. And it’s also, as you start to work through these steps, if you don’t have a huge gap between what is coming in and what’s going out of your monthly balance sheet, you know, it’s going to be hard to make progress on these financial goals. So it’s such an important step there, that it’s how much is coming in each month that you can really play with as far as saving and investing. And so, yeah, kind of building that gap. If you take the time to, okay, let’s cut subscriptions, let’s choose the cheaper apartment, let’s not go take on the big car payment, that can really supercharge the rest of these steps. Next, you mentioned the $1,000 emergency fund. I don’t know, I think that even initially, even if you have high-interest debt, it could be worth building up a little bit more. Things are expensive these days. Sometimes things come up that are totally unexpected, and $1,000, you know, you could plow through it right like this. So I think maybe $1,000 could have been a good starter emergency fund, but I would even encourage someone maybe to push to a couple thousand, like $2,000, $2,500, depending on what your circumstances are.
Mindy Jensen: You know, Evan, that’s a good point. Scott and I came up with our order of operations a couple of years ago, when things weren’t quite so expensive. So yeah, start with $1,000 and then look at your own specific situation. And does it make sense to you to build it up to $2,500, or does it make sense to you to start knocking out some of this high-interest credit card debt? Maybe you don’t have any high-interest debt and you’re like, okay, Evan’s right, $2,500 it is.
Evan Lawler: Maybe instead of just credit card debt, you know, you’ve got like payday loans at 2,000% interest. And then it’s like, okay, you know, that $1,000 could even be too much, right, if it’s really building that interest like crazy. So that’s a great point.
Mindy Jensen: Yeah. Don’t take out a payday loan.
Evan Lawler: No.
Mindy Jensen: Okay. So I think these first 5 are about what somebody in their early 20s is going to be able to accomplish. They’re not typically going to have tons of extra cash lying around that they’re not spending, that they’re waiting to invest. However, there are some people like engineers. There’s a school in Colorado really close to me called the Colorado School of Mines. And they have the highest starting salary, I think, of any college. A lot of their starting graduates are making like $250,000 a year working overseas in like oil and gas or mines or something like that. Like it’s really, really specific and really specialized. If you are a graduate of the Colorado School of Mines or similar, we’ll continue on with our order of operations. So you fully funded your emergency fund, 3 to 6 months of living expenses or more. Now we’re going to focus on your HSA. If you have a high-deductible health plan, you have the opportunity to contribute to a health savings account. And this is tax-free money going in. You can spend it on qualified medical expenses. So when you pull it out, it’s tax-free. And if you continue to grow it, you can invest it in a variety of investments and you continue to grow it to age 65, and you haven’t used it all yet, then you can just use that as another retirement account. In 2026, the contribution limits for a single person are $4,400, and for a family it is $8,750. That’s a lot of money that you’re putting into an account that I have traditionally used as a place to park my riskier investments because I want this account to grow. I am cash flowing my healthcare expenses. So that makes it really easy for me. I max out the HSA every year and then I don’t pull any money out except that one time when my kid had braces for $6,000. My other kid had braces for $6,000. I hadn’t sold a house in a while. I’m like, ah, I’ll pull some money out for these darn kids.
Evan Lawler: The HSA is one of those funky things, right? I don’t think that a 25-year-old starting from $0 would think that this early in their sequence of steps they would see a health savings account, right? You mentioned it’s a triple-tax-advantaged account, right? The money’s not taxed when it goes in. It’s not taxed when it comes out. It’s not taxed when it grows, right? So it’s a really powerful account, and it doesn’t have a huge contribution limit for a single person like me. It’s $4,400 a year. That’s not a huge amount of money, but if you can cash flow your health expenses and kind of save those receipts, then later you can reimburse yourself. So it’s a really powerful account, and that’s why it’s so high up on the series of steps here.
Mindy Jensen: Exactly. Yep, that’s exactly why, because it doesn’t have a huge contribution limit and because it is such a powerful account.
Evan Lawler: Yeah, and you do need a high-deductible health plan like you mentioned before, Mindy. So it’s worth considering if you have any recurring subscriptions or any health considerations, whether or not that’s the optimal path to take for yourself. But if it is, it can be a very powerful account and not one to overlook.
Mindy Jensen: So in our normal order of operations, Scott and I have fully fund your 401(k) ahead of funding your Roth IRA or doing a backdoor or mega backdoor Roth IRA. But for somebody in their 20s with so much growth ahead of them, I might flip those and say, after you’ve maxed out your HSA, now max out your Roth IRA if you are eligible to put money into a Roth IRA. The reason that I would choose this over the company 401(k) is the Roth money, you’re paying taxes in your current tax bracket, and then it is growing tax-free until you’re 59 and a half. If you’re 20 years old, that’s 39 and a half years of tax-free growth. As opposed to putting money into your traditional 401(k), if you have a Roth 401(k) option through your company, I might flip those back and say Roth 401(k), then the Roth IRA, simply because of your age and your length of tax-free growth by putting money into the Roth account.
Evan Lawler: Yeah, that Roth money can be super powerful. I think sometimes people call it first money in, last money out, because you just want to leave it in there growing as long as possible. You’re right, when you’re at 59 and a half, you have access to it, but you can continue to let that money grow. And so yeah, I think you pull that Roth IRA forward one step. But if you have a Roth 401(k), it’s definitely worth considering. And it’s also worth thinking about whether or not you have a good 401(k) plan. So definitely read up on what fees or expenses, what investment options do you have. And if you have a great 401(k), then it could be neither here nor there which you pick, especially if you have that Roth option. But yeah, it could be worth pulling forward that Roth IRA, where you have the full scope of investment options and that specific tax designation, which can be a huge win, especially early on.
Mindy Jensen: Evan, you just brought up a really good point that we don’t have in our investing order of operations, but I want to share with anybody in their 20s: take a moment to stop into the HR department at work and talk to them about the entire spectrum of benefits that are offered, because it’s not just necessarily a 401(k) and a health plan. I have worked at companies where they offered free health club memberships. All you had to do was ask. It didn’t come out in the onboarding. Somebody sitting next to me was like, “Oh yeah, don’t forget, they’ll pay for your health club.” Like, whoa, what? They didn’t actually pay the bill. You had to bring the bill in and they would reimburse you. I had a company that paid for fertility treatments. I didn’t need fertility treatments at the time, but that’s a really huge potential perk if that’s something that you need. There are all sorts of random perks that companies will offer, but you might not know about them, or maybe they glossed over them in the introduction to the company. Ask your HR department what exactly are all the benefits that are being offered at this company and see if any of them work for you.
Evan Lawler: Yeah, that’s such a good point. And I think that it hits on a broader trend. If you’re 25 with $0 trying to pursue these ambitious goals, don’t be afraid to ask questions, right? The truth is, you’re 25 and maybe you don’t know a thing or two about your company benefits or investments or personal finance in general. People at 55 don’t know anything about their benefits or their investments or personal finance, right? So don’t be afraid to ask questions. Go ask your HR department. We’re working our way through this optimized list here, Mindy. And if you look at this list and you think, “I can’t get past step 3, I can’t get to step 4,” that’s okay. That’s totally fine. That shouldn’t stop you from starting on your path. You’re so early on your journey at this point in your life that even a small amount of progress can really compound over time and make a huge difference.
Mindy Jensen: Evan, I once read an article that said if you started investing at age 22, you invest X every month from age 22 until age 30, and then you don’t invest anything else from 30 to 65, you will have more money at age 65, traditional retirement age, than if you invested 2X starting at age 30 and going to age 65, 2X every month. You’ll have more money at age 65. And this is super powerful. The power of compound interest is unmatched. So anything that you can start in your 20s is going to be huge by the time you’re 65.
Evan Lawler: So we talked about the 401(k), the Roth IRA, and there are lots of options here. There’s actually a bit of a crossroads, maybe like a side quest. So the next thing that we have listed here are 529s. But if you’re someone without kids, like myself, maybe a 529 is not something that you’re able to access or interested in investing in. But at this point, there is the option for these backdoor IRAs and mega backdoor Roth options. And these can get a little bit complicated. They’re kind of a more complex investing approach that, you know, you have to have a certain type of 401(k) plan in order to access. But if you’re someone like coming out of the Colorado School of Mines and you’re making $250,000 at age 25, you can actually— this year, in 2026, the maximum you as an employee can contribute to your 401(k), Roth or traditional, is $24,500. But using the mega backdoor Roth strategy, that number, including your employer contributions, could be all the way up to $72,000 per year. So I’m not sure we want to get into all the specific details on how to execute those, because it’s a little bit complicated. But if you’re a high-earning young person, it could be a really powerful strategy.
Mindy Jensen: That is an episode all to itself. But yeah, absolutely. If you are a graduate from the Colorado School of Mines, or similarly making a ton of money in your early 20s, that is a great strategy. And I highly recommend doing a little bit of research and getting more money into your Roth sooner.
Evan Lawler: Definitely.
Mindy Jensen: And yeah, the next on our list is 529s, but if you don’t have kids, that’s saving money for college for kids that don’t even exist yet. So I would say push that to the side and wait until you have kids. After that, we’re recommending taxable investments. This is after you already have a fully funded emergency fund, and your 401(k) or your Roth IRA are already maxed out. Now we’re taking any additional money that you have available and putting it into an after-tax brokerage account. This account has so much flexibility because you’ve already paid the taxes on the money going in. You only pay taxes on any gain that you take when you withdraw it, when you sell that stock. So it’s a great way to give yourself a lot of flexibility down the road. You can always sell these at any time. You can’t access your 401(k) before age 59 and a half unless you pay a 10% penalty plus taxes if it’s a traditional account. The taxable investments, there’s no penalty for it. That’s just your money, and you can access it at any time.
Evan Lawler: I totally agree, Mindy. The real power of the brokerage account is the flexibility that it offers you. With these retirement accounts, there’s a tax optimization, and as someone on the Coast FI journey, I take full advantage of those tax-advantaged retirement accounts. But the taxable brokerage is not to be slept on, as the kids would say. It is a very powerful account as well. And there was an episode on BiggerPockets Money, when I was just a wee listener, that really changed my perspective on these accounts, because I was someone who was always just tax optimal, right? I was like, I want to take full advantage of these tax-advantaged retirement accounts. But I believe it was episode 597, you guys had on Mark Livingstone, and he went through a breakdown of what do you really expect to pay in effective tax rate when you’re pulling from these taxable investments. And the conclusion was basically that it’s lower than you might expect, right? You might project that you’re paying 25%, and nobody really knows super far in the future what the tax law will be, but it’s not something to be ignored. And these accounts can be really powerful, especially if your goal is an early retirement and you really want to focus on having flexibility and getting access to your money when you want it. Definitely consider contributing to your brokerage account here.
Mindy Jensen: That is a very, very powerful account if you still have money to invest after you’ve done all the other options here. The last item that I would put in here is low-interest debt, anything below 8% that you want to pay off. I would not include your mortgage, but I am not going to pay off your mortgage for you anyway. So if that’s something that you feel you want to be mortgage-free and you want to pay off your 3% mortgage, go ahead. Personal finance is personal, and you can do whatever you want.
Evan Lawler: Absolutely. Yeah. And I would just say, like, at this point it’s like you’ve done so many optimal steps that it really is personal— finance is personal. If you are taking full advantage of these accounts and contributing aggressively, especially if you’re someone who’s fortunate enough to be able to do that from a young age, then you can kind of do as you wish, right? Because it might not be optimal if you’re going to pay off your 4% student loans, but I have student loans and the weighted average on them is 2.9%. But when I graduated from college, I was losing sleep over them. Right. So I was doing all these other steps, taking full advantage of them as much as I could, and then also contributing aggressively to those student loans because I hated seeing that number and thinking of the fact that I was in $30,000 worth of student loan debt. So yeah, personal finance is personal, but make sure you’re taking advantage of these other steps first to really prepare yourself for those big goals that you set in the beginning. Once you get through them, contribute towards that low-interest debt.
Mindy Jensen: One other thing that I would encourage anybody in their 20s to do is work on being the person at work who is known for their reliability, known for their knowledge, known for being the person that you can ask to do something and they’ll say yes. And the reason that I say that is you’re young, you are presumably not married or have kids, you don’t have a lot of outside time obligations, and you can put in a little bit of extra work. When you are the person that your boss relies on, that’s really, really powerful. That gets you more consideration when it comes time to raises, when it comes time to vacations, when it comes time to preferred projects. And being a great employee is so powerful when it comes time to leave and go find your next job. You get a great recommendation, or you get somebody trying to keep you there.
Evan Lawler: Yeah, I totally agree. When you’re 25 years old, you probably don’t have this huge complexity of all these side hustles or a business that you’ve already started and is making money. Most people are not going to have that. The biggest shovel that they’ll have to work towards their financial goals is that income. And so we went through all these details of the different accounts and the orders of operations, but at the end of the day, do the things that you know you need to be doing, right? Everyone at work should think that you’re a hard worker. Everyone at work should enjoy when you’re on their projects. They shouldn’t dread when they hear that you’re going to be on their projects, right? Your boss should think that you’re doing a good job, right? You should have a lot of evidence for that. And so I totally agree, those things can really move the needle also. And it’s important that while you’re working through these steps, that you also consider those.
Mindy Jensen: Absolutely. Evan, this was a super fun episode. I really am excited for people who are in their 20s who are hearing about financial independence and really wanting to pursue it, either full FI or Coast FI. I just think it’s such a great goal to have and such an achievable goal to have. Even if you’re just starting out and you don’t have a huge salary, you can start moving the needle even a little bit. So Evan, you talk about Coast FI a lot and being in your 20s and pursuing financial independence on your channel. Remind my listeners where they can find you.
Evan Lawler: Absolutely. I totally agree. At 25, you have so much potential. You can find me on any social media platform.
Mindy Jensen: And you can find even more financial independence information on the BiggerPockets Money social media channels. You can follow us on Instagram, Facebook, and YouTube @BiggerPocketsMoney. And if you’d like even more financial independence information, we have a whole website filled with resources, blog posts, calculators, and templates, all free, all designed to help you on your financial independence journey at biggerpocketsmoney.com. All right, that wraps up this episode of the BiggerPockets Money Podcast. He is Evan Lawler, I am Mindy Jensen, saying, gotta scoot, boot.
