How to Start Building Real Wealth in Your 20s (Even on a Modest Income)
You’re 23, earning around £1,800 a month after tax, sharing rent of £1,090, covering bills, and sitting on about £2,700 in your bank account. You’re not a big spender, you’d rather save, but you feel like you’re behind and want to grow your money faster. That’s a solid place to start – you’ve already done two crucial things: you work full-time and you’ve avoided blowing your income.
Now the goal is to move from simply “not spending much” to having a clear plan: structure, priorities, and a strategy for saving and investing.
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1. Get completely clear on your real numbers
First, you need an accurate picture of what’s happening with your money each month. A lot of people feel broke or behind simply because they’ve never seen the real breakdown.
1. Calculate your monthly net income
– Your take-home pay: about £1,800 per month.
– Your partner’s income: not specified, but you said you basically live on your wage and use hers for spending. That tells you something important: there’s likely room to save more as a household.
2. List all fixed expenses (your share):
– Rent: £545
– Your share of bills: from what you wrote it sounds like around £800 each on bills and living costs, which is unusually high relative to your income. Double-check this number – it might actually be your combined bills or you may be overestimating.
– Total basic monthly outgoings (your side): roughly £1,345 (545 + 800), if that number is accurate.
3. Check what’s truly left
– With £1,800 coming in and about £1,345 going out, you should have roughly £450 per month remaining on your side.
– Your partner also “gets about £1,000” each month after her share of rent and bills, from your description. Together, that suggests you’re not in survival mode – you’re just missing a plan.
Without a clear budget, that leftover money disappears into “random spending.” Your job is to give every pound a purpose.
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2. Build a basic budget that actually works for you
You don’t need something insanely complicated. You need a structure that:
– Covers essentials
– Builds savings automatically
– Leaves space for guilt-free spending
One simple approach is a modified 50/30/20 rule:
– 50-60%: Needs (rent, bills, groceries, transport)
– 10-20%: Savings and investing
– 20-30%: Wants (eating out, hobbies, extras)
Given your current situation, you might aim for something like:
– Needs: 60-65%
– Savings/investments: 15-20%
– Wants: 15-20%
For example, from your £1,800:
– Aim to save/invest at least £200-300 per month to start.
– Keep £200-300 as flexible spending.
If that sounds tight, that’s a useful signal: either your rent/bills are too high for your income, or you’re not tracking spending carefully enough. In either case, the solution starts with visibility – track one full month of spending by category.
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3. Your first goal: an emergency fund
Before you start investing, you want a basic financial safety net. This stops you from going into debt when something goes wrong (lost job, medical costs, sudden move, etc.).
Target:
– Minimum: 1 month of essential expenses
– Better: 3 months
– Ideal over time: 3-6 months
If your personal share of essential costs is around £1,300-1,400/month, then:
– Minimum target: £1,500-£2,000
– Solid target: £4,000-£5,000
You already have £2,700 saved, which means you’re not starting from zero. That’s a good base.
Next steps:
1. Decide on a specific emergency fund target (e.g. £4,000).
2. Put this money in a separate instant-access savings account, not your day-to-day current account.
3. Automate transfers from your main account right after payday (e.g. £200-300 a month until you hit the target).
Don’t treat this as investment money; this is your “sleep well at night” fund.
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4. Use the right type of savings account
If your current £2,700 is just sitting in a standard current account, it’s essentially losing value over time due to inflation.
Consider:
– High-interest savings account or easy-access savings – somewhere that pays a better rate than your main bank account.
– Cash ISA – depending on the options and limits, it can give you tax advantages on interest (important as your savings grow).
Requirements:
– Easy access (for emergencies)
– No or minimal fees
– Interest rate as high as you can reasonably get from a reputable institution
You won’t get rich from interest alone, but this step stops you from leaving free money on the table and builds good habits.
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5. When you’re ready: start investing (but do it right)
You asked whether you should invest. The answer, long-term, is yes – almost everyone who wants to build real wealth needs to invest. But:
– Don’t invest your emergency fund.
– Don’t invest money you might need in the next 3-5 years (for example, for a house deposit soon).
Once you’ve:
– Built a basic emergency fund
– Got control over your monthly cash flow
…then you can start putting a portion of your savings into investments.
For most people in your situation, a smart, simple starting point is:
– Low-cost index funds or ETFs that track broad markets (like a global stock index or a major stock market index).
– Use a stocks and shares ISA if available to you – it shelters your gains from taxes within limits.
Key principles:
– Invest regularly: e.g. £100-£200 a month, every month, no matter what the market is doing.
– Think long-term: 10+ years, not months.
– Avoid gambling: individual stock-picking, crypto hype, get-rich-quick tips, and high-fee “advisors” who are really just salespeople.
At 23, your biggest advantage is time. Even modest monthly investments can grow significantly over 20-30 years.
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6. Don’t overlook your pension
If you’re employed, you may already be in a workplace pension scheme where:
– You contribute a percentage of your salary
– Your employer also contributes
– You get tax relief on your contributions
This is essentially free money plus tax benefits. Check:
– Are you enrolled?
– How much are you contributing?
– Does your employer match up to a certain percentage?
If possible, try to contribute at least enough to get the maximum employer match. That’s an instant return on your money.
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7. Fix the “we use my wage for bills and hers to spend” setup
This arrangement may feel simple, but it’s not necessarily fair or efficient long-term. It also makes it harder for you personally to build wealth.
Consider a more structured approach as a couple:
1. Proportional contribution
– Each of you pays a percentage of your income toward shared bills (e.g. rent, utilities, groceries). If you earn similar amounts, split 50/50. If one earns more, they can pay a higher share so the impact on each person’s disposable income is balanced.
2. Joint bills account
– Set up an account purely for rent and household bills.
– Both of you transfer your share right after payday.
– What’s left in your personal accounts is for personal spending and personal savings.
3. Shared goals
– Talk openly about goals: emergency fund, house deposit, car, travel, future kids, etc.
– Agree on how much you’ll both save each month toward those goals.
This stops you from feeling like “the one who pays everything” while the other person’s income disappears into non-essentials. It also helps both of you progress financially as a unit.
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8. Cut quiet money leaks and renegotiate fixed costs
Building wealth is a combination of earning more, spending better, and investing wisely. Before chasing higher earnings, clean up the leaks:
1. Audit subscriptions and recurring payments
– Streaming services, apps, gym, memberships, unnecessary insurance, etc.
– Cancel anything you don’t really use.
2. Review utilities and contracts
– Internet, phone, energy tariffs – compare prices periodically.
– Switching to better deals can save hundreds a year.
3. Rent and location
– Your rent isn’t outrageous for two people, but if your overall bills are eating most of your income, ask:
– Could you move to a slightly cheaper place or area?
– Could you get a flatmate if you live in a larger place?
– Housing is often the biggest lever – a modest reduction in rent can free up significant savings every single month.
4. Food and day-to-day spending
– Cook more at home and batch cook.
– Plan meals and shopping lists to avoid takeaway and random convenience spending.
Even saving an extra £150-200/month this way can significantly boost your savings rate.
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9. Increase your income: the most powerful long-term move
Cutting costs helps, but there’s a limit to how much you can save. There is no real limit to how much you can increase your earning potential over the years.
At 23, you have decades ahead of you. Use these early years to build skills and experience that will pay off massively later. Consider:
1. Ask: can I earn more in my current job?
– Are you being paid fairly for your role?
– Could you negotiate a raise after demonstrating results?
– Can you take on additional responsibilities that justify higher pay?
2. Look at your industry and role
– Are there higher-paid roles related to what you do now?
– What skills do people in those roles have that you don’t yet?
3. Invest in yourself
– Learn skills that are in demand (for example: digital skills, coding, data analysis, project management, trades, marketing, etc.).
– Use free or affordable learning platforms, then build a portfolio or get certifications that matter in your field.
4. Side income
– Consider part-time or freelance work, weekend shifts, or online gigs that match your skills and don’t burn you out.
– Even an extra £200-300/month, fully saved or invested, can dramatically accelerate your progress.
Over time, income growth will be the single most important driver of your wealth.
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10. Turn money goals into specific, measurable targets
Feeling like a “failure” usually comes from comparing yourself to others or to some vague idea of where you “should” be. Replace that with clear, realistic goals, for example:
– “I want an emergency fund of £4,000 within 18 months.”
– “I’ll invest £150 a month starting 6 months from now.”
– “I want to reach £10,000 total savings/investments by age 26.”
Then break them down:
– Emergency fund target: £4,000
– Already have: £2,700
– Need: £1,300
– Monthly saving: £200-250 → target reached in 5-7 months.
– Investment contributions:
– After emergency fund is done, redirect that £200-250 into a stocks and shares ISA each month.
As you hit each goal, your confidence grows and your sense of failure fades, replaced by a feeling of control and progress.
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11. Simple action plan for the next 12 months
To make this practical, here’s how you might structure the coming year:
Month 1-2
– Track every pound of spending.
– Set up a basic budget (income, needs, savings, wants).
– Open a separate high-interest savings account for your emergency fund.
– Agree with your partner on a fairer, more transparent money system.
Month 3-6
– Automate transfers to build your emergency fund to your chosen target.
– Cut or reduce obvious unnecessary expenses.
– Review your workplace pension and at least contribute enough to get the full employer match.
Month 7-12
– Once your emergency fund is in place, open a suitable investing account (for example, a stocks and shares ISA) and start monthly contributions.
– Work on increasing your earning potential: ask about progression, look at higher-paying roles, build skills.
– Regularly review and slightly increase your monthly investment as your income and comfort grow.
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12. What you should not do
Just as important as the positive steps are the traps to avoid:
– Don’t compare your progress to people whose situation you don’t fully understand.
– Don’t invest money you might need soon.
– Don’t chase high-risk “opportunities” promising quick returns.
– Don’t ignore debt if you get into it – high-interest debt should be cleared before serious investing.
– Don’t assume you’re a failure at 23 because you don’t have a huge savings balance. You’re early in the game.
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You’re already ahead of many people your age simply because you’re thinking about this now, you’re earning, and you’re not blowing your money. With a clear plan, a few structural changes, and consistent action, you can steadily build up your savings, start investing, and set yourself up for a much stronger financial future.