Let's face it. We think we're know-it-alls when we're younger. We think we have the world figured out and there's no one that can tell us any differently.
The fact is we don't know shit. We have zero experience, very little knowledge and an ego that tells us otherwise. I'm here to tell you that that ego of yours is going to get you in trouble. Take it from someone with experience.
Now I'm only 34 and there's plenty of things I still have to learn. But I was able to invest my way to early retirement. So when it comes to investing and personal finance (and engineering) - I'm your guy.
Ready to hear what I wish I knew in my 20s then? Let's go!
#1 - Drop the ego
I touched on it a bit above, but your ego is the biggest thing in your way of becoming great. What do I mean by that? Say you want to learn something new, let's use woodworking as an example.
When you have an ego, it makes learning difficult. So instead of listening to someone with experience or even watching a YouTube video, maybe you try to start building things on your own. What happens next? Your first project sucks and you quit. Your ego can't handle it.
But when you drop the ego and are willing to learn, you realize it takes years of practice to become any good. Everyone's first projects are terrible, even the masters. The difference is they continued to work at it consistently and their work gets better over time. More on consistency below.
A great quote by Albert Einstein:
I'll give you a personal example of my ego getting in the way. It's freshman year in college and I'm studying mechanical engineering. I have a 3/4 scholarship (50% academic, 25% athletic) and I think I'm hot shit. I mean my ego is huge.
I start partying, missing classes and just being a dumb 18 year in general. By the end of the first semester, I failed chemistry and my GPA is too low for me to play baseball. I was crushed, baseball was my love. Not only that - my athletic scholarship was gone - right out the window.
Thankfully, I still had my academic scholarship. I was put on probation and I needed a 3.5 GPA that next semester to keep the scholarship. So you would think I learned my lesson and did what I had to do to keep the scholarship right?
Well, you would think wrong. My ego told me I was a genius, that all I had to do was show up to class, do the bare minimum, and that there was no need to study for any exams because I would easily pass them. And wouldn't you know it, I lost my scholarship.
The school I attended was $32,000 per year. I was forced to take out over $90,000 in student loans over the course of the next four years. Between interest and principal, my ego cost me roughly $130,000 overall. Quite an expensive lesson - I was quickly humbled and lost the ego after that.
Luckily, I got my shit together, brought my GPA up, played baseball for 3 years, landed a great job and graduated. Oh, and I managed to get a partial scholarship back in my 4th year. Getting rid of the ego changed my life.
#2 - Consistency + Patience = Success
I mean it; the ability to be consistent is a superpower. The hardest thing to do in life is show up, day in and day out, while seeing little to no progress. By remaining consistent, you are giving yourself a chance to grow and build on where you were the day before.
And in the world of instant gratification, patience is a virtue. We want everything now. Your food delivery took longer than 30 minutes? What is this the 1800s? Your Amazon Prime order took 2 days? The world must be ending. You didn't get rich quick? Time to quit.
That's why I would argue that consistency and patience are the most important aspects to becoming successful, at anything. Without these two traits, you will never succeed.
Want to lose weight? Eat healthy consistently for a long period of time.
Want to get fit? Go to the gym consistently for a long period of time.
Want to build wealth? Invest consistently for a long period of time.
The recipe is simple. The execution is difficult.
#3 - The Power of Compounding
Here's another quote by Einstein: "Compound interest is the eighth wonder of the world. It is the most powerful force in the universe. He who understands it, earns it; he who doesn't, pays it."
So what is compound interest? There's many complex definitions but when it comes to investing, here's what you need to know. Compound interest is your money's ability to grow exponentially over time.
This is why you'll hear me say time and time again that the earlier you start investing the better. The more time your money is in the market, the more growth it can experience. Let's take a look:
Let's say you are 20 years old and you do not have much disposable income. Maybe you only have an extra $10 per week after your expenses. Ten dollars invested may not seem like a lot now, but it adds up over time. Here's a look at what $10 invested every week looks like over the course of your 20s.
At first glance, doesn't seem like much right? Well, it's $3,300 more than if you just put that money in a savings account and more importantly, it's just the beginning. We all start somewhere.
Let's look at if you invested $10 per week from the time you were 20 until you reached the official retirement age of 65.
Not too bad for just 10 bucks a week, right? See how the green bars grow more and more every year - that's compounding. Your money is growing exponentially thanks to time.
Let's take a look at what would happen if you waited 10 years and started investing $10 per week at age 30.
Remember that initial $8,685? Missing those ten years cost you $241,139. That's a lot of money you would miss.
Now, let's have some fun. Theoretically, you should make more income as you get older so you should be able to invest more as well. Let's see what happens when you invest $10 per week in your 20s, $25 per week in your 30s, $50 per week in your 40s, $100 per week in your 50s and $150 per week in your 60s (to 65).
Safe to say, start investing today and take advantage of time and compounding.
There you have it, the three things everyone should know in their 20s. Hope you found this useful and can apply these going forward.
If you are looking for books that can further help you in your 20s, I recommend these three:
Atomic Habits by James Clear - packed with self-improvement strategies, this book teaches you how to make the small changes that will transform your habits and deliver remarkable results.
I Will Teach You To Be Rich by Ramit Sethi - this book helped me tremendously in my financial journey. The book teaches you to spend extravagantly on the things you love, and cut mercilessly on the things you don't. Will be making a blog about it soon - Highly recommend.
The Psychology of Money by Morgan Housel - Doing well with money isn’t necessarily about what you know. It’s about how you behave. And behavior is hard to teach, even to really smart people.
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I am not a licensed financial advisor or financial professional. This is not investing advice. I am simply sharing my research and opinion based on that research. It is very important that you do your own research and make investments based on your own personal circumstances, preferences, goals and risk tolerance.
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