In life, there are a ton of lessons we come to learn. We learn to look both ways when crossing the street and that if you don’t give your girlfriend enough attention she’s going to leave you…not that I know anything about that. However, there are some lessons that people never get around to learning which is why I want to share with you 5 costly money lessons people learn too late in life!
Lesson #1: If you don’t make money while you sleep you will work until you die
This is by far and away my favorite Warren Buffett quote and it’s also very true. Now, it’s kind of ironic that Warren Buffett has been quoted as saying this even though at 90 he’s still working while having a net worth of $80 billion but this is by choice which won’t be the case for everyone.
You see, many people are blind to the fact that if you solely rely on active income to keep yourself financially afloat you will work until you die. This is because every dollar you make will require active effort to do so.
Now, obviously no one wants to work until they die but many do because they simply never gain an understanding of what it takes to separate their time and money. Unfortunately, school teaches us skills we can use to get employed and earn an income but there is no mandatory education around how to manage that income when it starts coming in.
Therefore, let me give you the education school never did right now. If you want to avoid working until you’re in adult diapers then here’s a simple strategy you can use. First, work to build up 2–3 reliable income streams and keep your expenses within a reasonable range to allow yourself to save money every month. Then, invest into appreciable assets like stocks and real estate, both of which will help fund your expenses in your old age. Then, rinse and repeat this process until your assets can support you financially and you’re set!
Lesson #2: You don’t need a lot of money to make a lot of money
Let me share with you some great news; you don’t need a ton of money to make a lot of money. Now sure, having money does help in building wealth, there’s no doubt about it. For instance, if you want to buy a rental property, you’re going to need thousands of dollars for a downpayment. Alternatively, if you want to live off dividend income then you’ll need a couple million dollars invested. Fortunately, to make a lot of money, having a lot of money is not a starting requirement.
You see, the main driver of income is value generation and fortunately these days, being able to learn how to provide value to others is easier than it’s ever been before. Think about this, back in the day if you wanted to learn something you had to either wait to learn it in school or trek down to the library, crack open an encyclopedia and start reading. Nowadays, we have the world at our fingertips and the barrier to making more money is significantly lower.
For example, I started my other YouTube channel Betterment Boss with less than $1,000 and now it makes me over $100,000 a year. Alternatively, there are now Google certifications that allow you to learn in-demand skills for less than $1,000. However, if even $1,000 is outside your budget, YouTube has a plethora of free tutorials that you can use to learn skills that can be exchanged for big bucks. Therefore, a money lesson that must be learned early on is that your present cash balance should not hold you back on your quest to make more money!
Lesson #3: Those who get rich don’t save, they invest
For most people, the extent of the financial education they got from their parents was to use their credit cards carefully and to save as much money as you can. Now, while I agree with the first point, the second needs more context. You see, saving money is important but it’s not the be-all and end-all of financial success.
Saving, in my eyes, is a defensive financial mechanism that will allow you to meet your bills and have some financial peace of mind but for the average person, saving money won’t make you rich. For example, if you earn an average salary and save $25,000 a year from age 20–70, you’d have $1.25 million. I know this seems like a lot of money now but in 50 years this will probably only buy you a bottle of Coke due to inflation.
Now, if you invested that money instead, the amount you’d end up with is quite shocking. If you invest $25,000 a year for 50 years at a 7% rate of return you’d have $10M which should at least buy you a six-pack of pop and a bag or two of chips.
The lesson here is that saving should only be seen as wealth preservation but if you want to experience wealth expansion, you have no other choice but to invest!
Lesson #4: A good mentor will save you time and money
It’s been said that having a good mentor is like reading 1000 books and since most people don’t read anything but captions on Instagram or posts on their Twitter feed then getting a mentor is a must.
Now, if you’ve never had a mentor before then it’s easy to overlook just how pivotal they can be in your success. However, from my own experience I can tell you a good mentor will save you not only time but money and I’ll explain how they go about doing this right now.
When it comes to saving time, a good mentor will put you on a path to avoid making as many mistakes as possible which will ultimately speed up your path to success. I know when I was first starting out on YouTube I had no plan and no guidance and this led me to wasting over a year on the platform making no progress whatsoever. Then, after connecting with a mentor, I was able to not only learn from their mistakes but avoid ones that I would have inevitably run into without their help.
When it comes to money, your mentors should be helping you make the wisest financial decisions possible. For instance, your mentor may help you make key moves in your career to see the most amount of upward progression and leaps in your income. For me, having a paperback mentor as I like to call it in the form of the book Money: Master The Game by Tony Robbins taught me how to save over $500,000 over the course of my lifetime which speaks to the importance of continually seeking wisdom from external resources.
Therefore, as you can see, mentors can come in many forms from books to online personalities or of course people in your network. The takeaway here is that the most knowledge you can acquire, the more you can prosper financially!
Lesson #5: Your job allows you to survive but not thrive
If you’re like most young adults then you’ve probably gone through the grind of college or university with high hopes that all this work will have you rolling in cash. Well, I hate to be the bearer of bad news but jobs are short for “just over broke” for a reason because while they will pay you enough to survive, most don’t pay you enough to thrive.
I’m going to share with you a cold, hard truth right now and it’s the following. If you work for a profit driven company then they have no incentive to pay you a penny more than you’re willing to accept because every extra penny they pay you is one less penny they get to keep. As such, your salary is likely to raise minimally over time which means you’ve always just be getting by rather than thriving.
Unfortunately, not learning this lesson soon enough can be disastrous to your financial and overall well-being. For instance, if you rely only on your job for income you may never be able to buy the material goods you’ve always wanted, save up for your children’s education or put enough money away to eventually retire.
This is why I talk so often about creating new streams of income. The sad reality is that if you want to get ahead, you’ll likely need to supplement your 9 to 5 income with income from a part-time job, freelancing, a side hustle or the like. In fact, studies show that about half of all millennials have a side hustle today because the cost of living is rising much faster than their wages are forcing them into taking on extra work.
Therefore, the sooner you realize the limitations of salaried income, the sooner you can start to build an income plan around it!