20 year olds: you'll be amazed by how much you change in the next decade. You have the chance to get off on the right foot where most (myself included) did not. Below are a few things I wish I knew at 20.
I wrote this list because of a hugely popular question at Quora: what important things does a 20-year old need to know about money and finance. One answer—from James Altucher—caught my attention. I always enjoy Altucher's take on things, and his answer is mostly great, so check it out.
Not everything I suggest below relates directly to money & finance, but most of my suggestions will lead to a better career, which will lead to more happiness, and hopefully more money.
Altucher advocates against the traditional personal finance model, which goes: get a steady job, save and invest 10%-20% of your income, spend responsibility, and retire (inevitably) rich. Altucher suggests that you "choose yourself" by building your own business rather than being a functionary cog in a large corporate machine.
Altucher is right about this: functionary jobs are being absorbed, automated, and programmed away. I've seen it in my business (asset management) and many others. But I think there is a happy medium between James's "choose yourself" model and the traditional personal finance model. Even if you work at a large company, you can still choose yourself by carving out a role in which you are exceptionally skilled and valuable. Here are the six things that I think are most important for any 20 year old.
1. READ & LEARN. Reading is the best thing you can do to help yourself. Read about investing & money, for sure (here are four books to get you started, and you can sign up for a monthly list of books I send out here), but also read about many other things.
Read Will & Ariel Durant--they will teach you that the lessons of history (which go unheeded by most) are invaluable and that history is ever-repeating.
Read deeply about the topics that interest you most, because deep knowledge and insight is going to be valuable in the future, even as many jobs are automated away.
2. SAVE & INVEST. Altucher advocates against saving, against college, and against buying a house. Here's what I think:
- College was a mediocre experience for me. I went to Notre Dame, so it was almost worth it for the football alone, but the classroom environment just wasn't my cup of tea. I didn't really start learning until I graduated and began reading on my own. College, for me, wasn't worth the money--but that is only because I got my first (and only) job at my father's company—a job for which I was at first unqualified. If you don't go to college, it harder to get a first job. I was (and am) outrageously lucky, most aren't.
- Buying a house is often a bad idea financially but a good idea personally. I agree with Morgan Housel, so just read his thoughts here.
- As for saving & investing, the basic math is irrefutable: if you save even small amounts when you are very young, and invest that money into the global stock market, it will grow to a considerable sum over 40-50 years. To say otherwise is to ignore centuries of history. Read Simple Wealth, Inevitable Wealth. Read my book when it comes out. Then go open up an investment account (at Schwab, Wealthfront, or Vanguard) and get started. Youth is the most important advantage you will ever have in investing, don't squander it! Think about investing in terms of the potential of every dollar, and you’ll find that youth trumps everything.
3. NETWORK. Ugh, networking. I straddle the fence between introvert and extrovert and think cocktail parties are the most painful place on the face of the planet. I resisted networking for many years, but have ramped it up recently. Even after a short period, I’ve learned that meeting people with shared interests is one of the best things you can do in life. It is fun, engaging, challenging, and often leads to unexpected insights and opportunities. Of all the things I did wrong in my early 20's, this is the one that I wish I'd done differently. Meet people, share ideas.
4. EXPERIMENT & FAIL. Experimenting, by its very nature, means that you will fail. Get comfortable with failure and rejection early on in life because 1) they happen all the time and 2) you can't get anywhere great without failing a lot along the way. One easy way to fail often is to write. First drafts of anything are always failures. You learn, improve, and move on.
Do random things outside your comfort zone. Go to toastmasters and learn to speak in public (a rare skill that pays dividends), sit in a sensory deprivation tank for a few hours, try acupuncture, meditate, or give $5-20 away to random people every day for a month. I came up with the structure of my book while sitting in the sensory deprivation tank. Good things happen when you experiment.
5. DRINK LESS. I used to drink so much. Especially in high school, but also in college and in my early 20's. By your late 20's (where I am now), you'll drink a lot less and be very happy about it. Hangovers get in the way of all the above suggestions. Drinking is good, drinking too much is terrible.
6. DISCONNECT MORE. The biggest addiction today is distraction. I stand on the Stamford, Connecticut train platform every night with hundreds of other commuters. Each night I look up and down the platform, and every single person is buried in their phone. We are distracted all of the time, which leaves no time for thinking. We are well on our way to being the fat people from Wall-E. If you just disconnect and think, you’ll get ahead.
In Turning Pro, Steven Pressfield says “ambition is the most primal and sacred fundament of our being. To feel ambition and to act upon it is to embrace the unique calling of our souls. Not to act upon that ambition is to turn our backs on ourselves and on the reason for our existence.” In my early 20’s, I was lazy, drank too much, and saved too little. I ignored my ambition. The sooner you pursue your ambition, the better off you’ll be—financially and otherwise. Hopefully the above suggestions can help you do so.