From: alexhormozi
Successfully navigating your 20s requires avoiding common money mistakes, many of which involve not adequately investing in yourself [00:00:02]. Prioritizing personal and financial growth during this decade can lead to significant long-term benefits [00:00:11].
Prioritizing Education and Earning Capacity
Avoid Overspending on Status
In your 20s, it’s common to not have substantial wealth [00:00:17]. Spending excessively on luxury items like expensive cars or watches to “flex” for other twenty-year-olds is seen as unproductive [00:00:36]. Instead, successful individuals prefer to see younger people focusing on “eating poor, learning and hustling” [00:00:33]. The money that might be spent on status symbols should instead be invested into your own ability to earn more money [00:00:45]. This approach earns respect from those who are already successful [00:00:51].
Seek Jobs for Learning, Not Just Earning
A major mistake is taking jobs solely for immediate income rather than for the learning opportunities they provide [00:01:07]. Your 20s should be a “season of learning, not a season of earning” [00:01:26]. While another job might offer a higher salary, those offering a premium may not provide additional value or learning opportunities [00:01:34]. The earning potential from an extra 25,000 per year in your 20s is inconsequential compared to the long-term impact of developing skills [00:01:49].
Strategic Financial Management
Invest Your Savings in Yourself
While saving money is important, in your 20s, it’s crucial to invest it into your earning capacity rather than just traditional savings accounts [00:01:58]. The amount you make at this stage is often relatively low, making traditional savings less impactful when considering inflation over decades [00:02:20]. Doubling or tripling your earning capacity by investing in yourself will yield far greater returns than saving money for conventional assets [00:02:36].
Prioritize Investment First
Decide how much you will invest in yourself before spending money [00:02:49]. This means allocating funds for your learning and education off the top, rather than seeing what’s left at the end of the month [00:02:55]. This creates a dedicated “pile of gold” for opportunities to learn and grow [00:03:12].
Automate Investing, Manualize Spending
Make it easy to invest in yourself by automating transfers to your personal investing account [00:03:17]. Conversely, make it harder to spend on non-essential items that don’t provide a return [00:03:25]. Using cash instead of credit cards, for instance, can make you feel the “pain” of spending, reducing impulse purchases [00:03:29].
Shop with a Purpose
Avoid aimless “shopping” without a specific agenda, as it often leads to wasted money [00:03:52]. Stick to pre-approved lists and budgets for necessary items like groceries [00:03:57]. This simple habit can provide lifelong dividends [00:04:04].
Strategic Use of Takeout Food
Contrary to popular belief, once you earn more than $15 an hour, it can be more financially sensible to work during the time you would spend cooking and instead buy takeout [00:04:12]. The time saved from meal prep, grocery shopping, cooking, and cleaning can be reallocated to working and earning more, thereby investing in your earning potential rather than saving pennies [00:04:31].
Environment and Mindset
Live with the Right People
Choosing the right roommates is crucial [00:04:41]. Avoid those who are irresponsible, break things, or are late on rent, as they create distractions [00:04:43]. More importantly, seek out roommates who share similar goals and aspirations [00:04:51]. People with smaller goals may project their limiting beliefs or even subtly undermine your path, especially since the early stages of success can resemble failure [00:04:54]. Living with others who are also striving allows for mutual encouragement and shared perspective [00:05:16]. This can also be a cost-effective way to live in better areas [00:05:27].
Prioritize Your Micro-Community
Your immediate environment, or “micro-community,” significantly impacts your life [00:05:36]. It’s often worth paying a premium for convenience: being close to transit, a gym, and affordable food [00:05:38]. This saves time on commuting and other ancillary costs, allowing more time for productive activities [00:05:49].
Model the Right Season of Life
Avoid trying to emulate the current lifestyle of highly successful individuals if you are in an earlier stage of your journey [00:06:06]. A reputation is built on what you’ve done and what you say you’ll do, both coming true [00:06:10]. Focus on modeling the actions they took when they were in your current “season” of life, such as learning and building foundations, rather than their current expenditures [00:06:17].
Measure Money by Time Earned
To understand the true cost of purchases, calculate how long you must work to earn the money for them [00:06:30]. For example, a $100 shirt might require 6 hours of work after taxes [00:06:37]. This perspective helps you evaluate if an item is truly worth the time invested [00:06:44].
Compete with Yourself on Savings for Investment
Shift your focus from how much you earn to how much you are saving to invest in yourself [00:07:09]. Make it a personal challenge to consistently put money into your personal investment account each month [00:07:16]. Many people who earn large incomes end up with nothing because they don’t prioritize this [00:07:27].
Check Your Account Daily
Regularly checking your bank account can help you stay aware of your financial reality [00:07:39]. While it might initially be uncomfortable to see low balances, confronting this reality is the first step to changing it [00:07:42]. Consistent monitoring helps you understand your spending patterns and improve your financial health [00:07:51].
Investing in Experiences
Smart Spending on Unique Experiences
While frugality is key, there are specific instances when spending money on experiences is worthwhile, especially in your 20s [00:08:05]. These are often “one-time experiences” that may not be feasible or enjoyable later in life, such as backpacking through Europe and staying in hostels [00:08:08]. Your 20s offer optimal windows for certain types of adventures that close as you age [00:08:21]. If you are proud to spend on a limited, unique experience, it is supported, as long as it doesn’t drain your entire investment account [00:08:30]. These experiences contribute to the value of experiences and community in the 20s, even if they don’t offer direct financial returns [00:08:45].
NOTE
Building wealth in your 20s is less about current income and more about investing in education and skills that will dramatically increase your earning capacity over time. This approach, focused on starting early in investing in yourself, pays significant dividends.