The Game with Alex Hormozi - 14 Money Mistakes | Ep 484

Episode Date: January 12, 2023

Less flexing, more hustling. Today, Alex (@AlexHormozi) shares with us the 14 mistakes that most people in their twenties and how these mistakes have long-term effects. He dives into each mistake and how you can avoid them as soon as possible.Welcome to The Game w/Alex Hormozi, hosted by entrepreneur, founder, investor, author, public speaker, and content creator Alex Hormozi. On this podcast you’ll hear how to get more customers, make more profit per customer, how to keep them longer, and the many failures and lessons Alex has learned on his path from $100M to $1B in net worth.Timestamps:(0:49) - Money Mistakes #1-5(6:25) - Money Mistakes #6-10(15:47) - Money Mistakes #11-14Follow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition

You want to automate the investing and you want to manualize the spending. So in other words, you want to lubricate how easy it is for you to invest in yourself and you want to make it harder to spend on shit that never comes back to you. Welcome to the game where we talk about how to sell more stuff to more people in more ways and build businesses worth owning. I'm trying to build a billion dollar thing with Acquisition.com. I always wished Bezos, Musk, and Buffett had documented their journey. So I'm doing it for the rest of us.

Please share and enjoy. There are 14 massive money mistakes that. that people make in their 20s that you do not want to repeat. And this is one of those, like, don't buy an iPhone, buy an Android, like bullshit. Like, these are the actual things that if you make these mistakes early, you will have to pay for them for years. The good thing is that you can avoid them very easily. So I'm going to walk through all of them and why they're important,

underspending on education and overspending on status. And the thing that's crazy about this is that when you're in your 20s, you probably aren't ball in. And the amount of people on Instagram I see with their checkmark that they bought in front of a Lambo that they whatever, like we all get it. They're full of shit. We understand. The thing is, though, is that, like, the people who matter are not impressed.

Like, if I were a $200,000 watch, all the buddies that I have don't give a shit. Like, they also have $200,000 depends on whatever they want to. Like, it just doesn't matter. The only people that you impress are people who don't matter. And that's the thing. And so the only people who can help you, you're actually actively pushing them away. Because the thing is that the guys who are ahead of you, what they want to see you do in order to earn their respect is they want to see you do in order to earn their respect is they want to see. see you eating shit, living poor, learning, and hustling. That's what they want to see you do.

Like, you drive around in your new rolls or bends or whatever, you know what I mean, whatever it is, and you're maxing out all of your expenditures so you can flex to other 20 year olds is stupid. And it's a waste of money, which is why it's a mistake. Now, you should take that same money, which is why I said underspending on education, and plow all of that into your own ability to earn more money. And that's what somebody who's ahead of you is going to look back and give you that status and respect for. Like, you can get status in your 20s from people who are ahead of you if you're doing the right stuff right if you're laying the foundation the right way they will respect that you're on the right path if you show that you're on the wrong path they

automatically think they're like he doesn't get it or she doesn't get it it's not the game right they're playing the wrong game and they know that they'll never associate with you because until you understand the lesson next is taking jobs to earn rather than to learn and this is one of the biggest ones right so recently i'll just tell you a quick story we had a guy who applied right we had a thousand people who applied for a youtube editor so for editing videos like this, a thousand people applied. And we had, I don't know, I think we had 20 or 30 finalists after they submitted their videos that were pretty good. So we offered somebody very good pay for a YouTube editor role. And the guy said, I want an extra $3,000 a year. Missing the fucking

plot. And the thing is, is that like, what he didn't understand was that he was in a season of learning, not a season of earning. And so he might be. able to go somewhere else and get 30%, not even 3,000, 30% higher. But the thing is, is that when you're in that environment, the people who are going to pay that premium are paying the premium for everything you know and have nothing to add to you. If someone's going to pay you less, it's because you know less than they do and you're going to grow during that period of time. And that's priced in. And so when you're going into the jobs, and this is why if you're taking your jobs right now in order to earn, it's not the right season. You're trying to pull a lever, trying to cash in early.

Right. Like, figuratively, you can eat ramen and split your room for 400 bucks a month so that you could learn for 10 years and then murder it, right? The earning potential of you getting extra $10,000 a year or $25,000 a year in your 20s is so inconsequential on the long time horizon of the skills that you should be learning right now. And so if you've got a trick or you've got a couple skills that you're good at, get better at the skills and go to places that will make you better. Like, if you have the opportunity, and I'm going to plug it, but like, if you have the opportunity to work with like Mozy Media, right, that puts out all the stuff that we put that's growing everything in such a short period of time, then like, that's a great opportunity, right?

Like, many people would pay for it, not even get paid to do it. So the fact that like people get paid is like a bonus. And if you don't see it that way, then you're seeing the game the wrong way. That's what, that's the point here is that in the season of your 20s, it's a season of learning, not a season of earning yet. It will be when you get all the skills. But the moment you start pulling the lever on earning rather than earning, you've basically capped your potential. Does that make sense?

The person who's going to pay you the extra 30% more, that person is expecting that you download everything and will add nothing to you. You're getting paid the premium because they're not adding anything back. Three is that you save money. That is a mistake. Hear me out. You want to save money in your 20s but not actually save it.

You want to not spend it or blow it on shit and you want to put it into a separate account, but that money you want to invest. Now, not the dollar cost averaging S&P or whatever it is. You can do that by all means. It's a great way to have some money later. But if you want to become filthy rich, which is hopefully what Mosy Nation is here to do and build wealth and help people out, you want to invest that money into you and your earning capacity.

And so right now you make so little that the money doesn't matter. So like if you save $500 a month, $5,000 a month, $5,000 a month, Like, you can put that into the calculator and look what it's going to be in 70 years. And like, cool. But the thing is, is that, one, it doesn't factor in inflation. So when people see that they're going to be worth $4 million, $4 million in 60 years is also worth like a million dollars today. So it's not worth the same amount of money. And people forget to factor that in when they do the compounding.

All right, number one. But number two is that, like, think about how much more you'll get back if you spend $10,000 this year and then you double your earning capacity or you triple your earning capacity. Like, then replay that equation where you can put even. even more money. But then when you have $50,000 to spend on your, on your increasing your earning capacity, reinvest that. So then you get to half a million dollars year or a million dollars or whatever it is in your earning. Like you continue to reinvest in the equation shifts so dramatically. People are playing the game too small. And so in my opinion, the moment you start like actually investing like buying assets, things like that is the moment that you're saying, I don't need to learn

anymore because this is going to be my cap for my skill set. So in my mind, I always want to have that instead of saving money to invest in assets, invest in the number one asset, which is, you and increasing your earning potential. Decide how much you're going to invest first before you spend money. So hear me out. If you make X amount of money every month, you commit the first money, right? Because prioritization comes from taking, that's literally prior. It comes first, right?

It's that you take the money off the top, you skim it off the top and you say this money has been prioritized for my learning, my education, my whatever. You take it off the top first and then whatever you have left, that you can spend. Right? Because now we've already allocated for our future. it's not because we're having our rainy day fund, sure, have your 10 grants you have living expenses, whatever. But after that, all that money, that account, you can let it stock pile up, and then you see something that you want to learn. You have an opportunity, you have a course,

you've a workshop, you have seminar, whatever it is, and then deploy the capital, right? And then you get the skill back. Now, you still have the habit of every month, first money goes into my education, first money goes into my education, but you prioritize it first. Not what do I have left at the end of the month? Can I afford it? You've got this big pile of gold over here that every month you plan to, and then when you see the opportunity, you make the decision you pull the trigger. Next one. You want to automate the investing and you want to manualize the spending. So in other words, you want to lubricate how easy it is for you to invest in yourself and you want to make it harder to spend on shit that never comes back to you. All right? So this is why, as a side note,

Dave Ramsey talks about people having cash rather than credit cards because when people spend cash, it's harder to do. You actually feel pain when you buy things in cash compared to using credit cards. but anything that's automated and recurring, like those are the things that you want to make it harder for people to take money from you, and you want to make it easier for you to spend money on yourself in terms of investing. And so that's why, like, that skimming part,

you want to automate that. So that ideally you don't even see the money. Like, the only money that even hits your account is the money that you're allowed to spend. The other money, you've already allocated it out to the other things. Like, give your rent account maybe, and then you've got your personal investing account,

not S&P, S&Me, right? And then you've got your, sure, you've got your food and your car money. or whatever, right? Automate the thing that you want to have happen, manualize and add friction, the things that you don't want to have happen. Next, don't go shopping. Stick with your lists. So most times, especially in your grind time, you do the same stuff every day. You eat the same breakfast, take the same lunch. If you know you're going to be doing that a regular basis, and let's be real, you don't need another set of sneakers. You don't need a fancier code or whatever,

right? You don't need the watch. The idea that someone says, I'm going to go shopping, like they have no agenda. It just means like, I'm going to waste money today. And you're like, okay. And so stick with the lists that you already have pre-approved in terms of your budget of the money that I have left over. This is my list. These are my groceries. This is whatever. And if it's not on the list, you don't buy it. It's a very simple habit, but it will pay dividends for the rest of your life. Next, get takeout. Don't cook your food. Very contrarian. I know. Here's the thing. As soon as you make more than $15 an hour. It makes more sense for you to work that day and get the takeout food and get the time back. It makes more sense financially. And so most people can, like, if you're not

being a weirdo, like you can eat out for $10-ish-a-meal and you eat twice a day, $20 a day, $600 a month. Okay. Now, the idea is how long will it take you to make that money back? If you can make that money back in, like, again, this is the Delta. So maybe if you went to the grocery store, it'd be what, 100 bucks a week, right, versus $150 a week when you're eating out. It's like, is the net $50 a week, can you not make that up for the meal prep, going to the grocery store, cutting, cooking, cleaning, et cetera? Can you make all that up? And so this is one of those things where people are like, they save pennies, but they don't think big picture, in my opinion. It's like, if you save an extra $200 a month, the habit is worthwhile, but the idea is you're focusing on the

wrong part, right? You're saving the pennies rather than investing in the mega millions, which is you and the time that you have to allocate to learn. people live with the wrong people. All right. So the people that are around you, one, they have terrible roommates who break things, who go out drinking, who are late on rent. Like, these are all things that will distract you from the thing you're trying to do. That's like level one worst type of roommate.

Above that, you've got people who are responsible, et cetera, but they don't have the same goals as you, right? And so they will speak over you their limiting beliefs, and they will oftentimes not actually root for you, and they will kind of undercut you when you're on this path, which is probably different than them. And the thing is, in the beginning, what becomes success looks like failure because you're learning. You're not earning.

They're already pulling their earning trigger. They're bragging on the fact that makes $70 grand a year. Whatever. Who gives a shit? Right? Because you have a different goal. And so never listen to people who have smaller goals for your life than you do. All right.

And so making sure that you're living with the type of people who are trying to do the same thing as you are in your life will encourage one another. And you guys are kind of like in the game together, in the same mindset, listen to the same stuff and that's what will shape the way you see the world. And in your 20s is a lot of how the final beliefs about the world change, which is why it makes some of this content for people in that time zone because you haven't solidified your worldviews yet. After this period, it's about 25 to 27. It's significantly harder to change your worldviews. It only comes from trauma. People change the world. They get divorced and they change everything or they like come

back from Afghanistan. They change their world. Like trauma gets you back into hyper learning again. Your body's like, whoa, I have to learn this. I have to change my views of reality because something bad happened. Right. But most times there's no other reason that people learn after that. And so that's why I make this content this way. Real quick, guys, if you can think about how you found this podcast, somebody probably tweeted it, told you about it, shared it on Instagram or something like that.

The only way this grows is through word of mouth. And so I don't run ads. I don't do sponsorships. I don't sell anything. My only ask is that you continue to pay it forward to whoever showed you or however you found out about this podcast that you do the exact same thing. So if it was a review, if it was a post, if you do that, it would mean the world to me

and you'll throw some good karma out there for another entrepreneur. As a side note, I do think it's worth living with multiple people in your 20s because one, your 20s can be lonely, but two, it's also just a lot cheaper. I lived in a house with seven people in California and I was able to only pay 400 bucks a month in like a nice area, which leads to the next one, which is your micro community matters a lot. And so I think that it makes a lot of sense to be, I would overpay for convenience in terms of being close to stuff, like close to the highway so I can get on and off and right to places I need to, close to a gym and close to cheap places to eat, if I can do those things, and ideally,

if I can walk to them, I save time and gas. Like, I get outside, whatever, I can get some exercise in. But the more important thing is the time. Like, if you live in the middle of nowhere, and it takes you 25 minutes to get the gym and 25 minutes to go back, like, and 22 minutes to find stuff, like, there's all this time that gets eaten up, which is why, like, remote work is more efficient. You don't have all the transit, et cetera, et cetera. And so the micro community, I would say I'm willing to pay a premium to save all of the ancillary costs it would go with living somewhere less convenient, less safe. I would live with more people in a better area than fewer people in a shitty area. Next is you model the wrong season of life.

So people sometimes younger guys will look at what I'm doing. They're like, oh, I'm going to do what Alice is doing. The thing is just like you don't have the track record, right? And reputation is built on two things. It's built on scoreboard and it's built on shots called, which means it's built on what you've done and what you say you're going to do and having both of them come true. Right. And so the thing that builds the reputation is not modeling what I'm doing now, but modeling what I did before, right? And so you want to make sure that you model the right aspect of someone's life at the right time.

Flying private doesn't make you rich. It means you spend a lot of money. Sequence matters. When spending money, measure money in how long it took you to earn it. And this is, again, we're trying to add friction to when we're spending, right? And so let's see you make $20 an hour.

If you want to go buy a shirt for $100 box, right, then you have to think to yourself, $20 an hour, there's 20% payroll tax plus, you know, whatever, whatever. So I'm actually going to have to work six hours to buy that $100 shirt with tax, whatever, right? Six hours. So if someone said, I want you to work all day and I'll give you this shirt, would I do it? Probably not. And that's the thing is that a lot of times we're not aware of the value of our own money in terms of what we put in to make it. And so I remember when I was a kid, I went to, I worked at smoothie king, way about, I was 15 years old.

And all my coworkers would go next door and buy lunch in the middle of their shift, right? A six-hour shift. And I was making $7.25 an hour and a six-hour shift, right? So I was making $40, whatever, $43, $43.44. And then I had taxes on top of that, though, so it was probably close to like, I don't know, $33 or something like that after taxes or $36. And so people would go next door. I remember noticing this. And they would spend $15 bucks on lunch, right?

while they were working their shift. They would go to subway or whatever. And I thought to myself, I was like, every time they work, they do this. Because I would see the same guy do it. And I was like, so you have $36 after taxes for living here, for coming to work today. I was like, and 15 of that is you going to lunch next door.

I was like, so you're working six hours for 20 bucks. But people don't do that math. And I saw all my coworkers do it. And I was like, this is insane. And so, again, measure what it cost to buy something in the hours it took you to get it. So make the translation and then reevaluate the decision. You'll buy a lot less stupid shit. Get competitive with money around what you're saving, not what you're making. So I told you, this is a season of learning, not season of earning.

But to know what you're going to learn, right, you have to budget towards your investment. So rather than thinking, I'm making $5,000 a month and spending $5,000 a month, meaning I'm profiting personally zero, right? Say, I'm saving $2,500 this month to invest in me. And so make your PR, your personal records, around what you're able to put into that bank account every month. Watch how big it grows and your contribution every month. Make that the metric that you're optimizing around, even more so than the income. Because the thing is, I'll tell you this, I'm old enough now that I've had people who I know have been making hundreds of thousands, even millions of dollars a year and have nothing. Like, when I get in these backdoor conversations,

I'm like, all right, man, like, what's going on? I'm like, what do you got, what you got saved up so I can understand like the situation? I'm like, oh, I mean, got like 500 grand. I was like, Oh, mind you, for some people that might be a lot of money. I'm not saying it's not. I'm saying given their relative income for the amount of time they had, they blew everything. And so it's the same as a teacher who saved 500 grand or that same period of time. Like they wasted everything. And so make your personal records, the thing that you compete against, the thing that you optimize for, not the income, but the amount that you invest.

Make that nut the thing that you focus on and optimize every month. Next one, check your account every single morning. All right, I think this is a habit. Like, I stopped checking my account when I crossed 20 million. That was when I was like, okay, because the daily fluctuations and assets became, it didn't make sense anymore. But I checked it every, and the thing is, is until I started doing it, I stayed poor. I didn't want to look at my bank account because it would hurt my feelings. Seriously, I would look at it and I would just feel poor.

But that's okay. You have to confront reality in order to change it, right? And so I would, once I started looking at it every day, I actually started to get an idea when I talked about lubricating, lubricating the investing and adding friction to the expenses, I was like, man, there's so much automation on my expenses. Like, man, money's pouring out of this thing left and right. And so once I got a pulse on it, I knew Tuesdays is when I paid this. Thursdays is when I pay for this. The first week of the month, I'm like, I started to get a pulse on the money flow. And it's a, it's a habit that once you learn it, it's hard to forget. And so first thing in the morning,

check your account. All right. And if you do that, you'll get into this habit and you'll start getting an idea. And I promise you, just like losing weight, if you get someone to measure the weight every day, get someone to measure the bank account every day, it'll improve. Finally, when is it okay to spend money? Right? Now, I said education, obviously, that's where I'm going to prioritize it. But life isn't just that, all right? And so if there's one thing that I probably could have done better, is I could have spent money on one-time experiences. And what I mean by that is not going to the club and popping bottles, all right? But there are times when, you know, go to Europe and doing, you know, sleeping in hostels for three months, like, that's a cool experience that you're not going to be able to do

when you're 40, even when you got the money and the time. You're just not going to do it, right? So there are times of our lives that are optimal for certain types of experiences in those windows close. And so if there are experiences that you can only do in your 20s, I wholeheartedly support them, but you want them to be things that when you're 80, you're proud of. You're not proud of like popping bottles in your 20s. Like, you know what I mean? Like, it's not, you know, like, you're not like, yes, right? And so I think that giving yourself permission to spend on an experience in a limited fashion, you don't want to drain your entire investment account, right, to do this. But like to spend on something, you want to go see the Grand Canyon for three days.

You know what I mean? Go to the Grand Canyon. And what's interesting is that a lot of these experience are actually free. And so, but spending time and money, but especially time in your 20s to do some of these one-time experiences that when you're 80, A, you won't have the health to do, even if you've got the money in the time. And in your 40s, you probably also won't have the time even if you got the money. Like these are times where I would say, this is probably counter than what you expected in this video. I do think it's worth doing. It's probably one of the regrets that I have is that I didn't spend any on that. And I think if I had a couple of, like, I'll never, I will die now knowing that I never did the hostile experience in, in Europe. It's just not my,

I probably just won't do it. You know what I mean? Like my wife doesn't want to do it for sure. Right. And so if you have some of that independence, if there's some things that, like, are little unique to you. I think these are the times that you can do that and it's worth spending the time of the money to do it, even if it's not financially makes sense, because at the end of the day, like, you're going to die. It's not going to matter anyways. So anyways, those are the money mistakes people making the 20s, Mosey Nation, keeping awesome. And if you, our business is doing between $3 and $100 million a year, we'd love to talk to you. Otherwise, enjoy the stuff.