All right, Michael’s question is up next. He says, “I’m 21 and will make low six figures next year, so that’s a pretty big start. My income should increase over the next decade, likely at least doubling within 10 years. Does this mean I should contribute more than 25% to my investments right away?” So, unique opportunity here. High earner and potentially even higher earner. What should he be thinking about just starting off his career?
You know, this is my thought, Michael. What I care more about than you doubling your savings rate or saving aggressively now is that as your income increases, your savings rate moves in lockstep. So, if you can save 25% of that low six-figure income now, let’s say it’s $25,000, you save $25,000 a year now, and then in 10 years, your income is doubled, and you’re making $200,000, I hope that you’re saving $50,000 of your income for the future. I hope that your savings rate follows in lockstep. That matters more to me than you saving aggressively now.
Having said that, if I’m 21 and I’ve got a ton of income coming in, and I don’t have a ton of bills and I don’t have a ton of expenses, I don’t know that I would just increase my lifestyle for the sake of it. I mean, I don’t know that I’d go find ways to save money because maybe you can have a 30%, 35%, 40% savings rate. I don’t think that your future self will be upset at you for doing it, but I also don’t know it’s a necessity. We say all the time, and Brian, you may want to talk about this, after 25% savings, you get to choose. Yeah, like once you hit 25%, you get to choose what you do above and beyond that. Now, some people choose to save more, choose to build more because they want to give themselves options, but it’s not a necessity. It’s not something you have to do.
Oh, I love that Michael’s asking this question. First of all, kudos on the success. Take a deep breath to appreciate. Man, this is awesome that you even get to make these choices. But here’s the homework. You’ve got to begin with the end in mind. Go, what is the why? What are you trying to build for? Because you’ve got to first have a plan. You’ve got to figure out what we’re actually doing this for, and that’s going to help drive how much you need to be saving. Because if you think that, “Yeah, I can make this type of money, but the only reason I can make this type of money is because maybe you’re working in New York, you’re on Wall Street, and you know the way those industries work is that they grind you. I mean, they pay you a tremendous amount of money, but you work 60 to 80 hours a week, and they’re going to take a portion of you. And maybe that’s not sustainable forever, or maybe you work in public accounting.”
I mean, I think about a lot of my peers that, you know, you’re getting ground through the meat grinder of that profession, where you know you’re working, giving a lot of yourself. So, begin with the end in mind while you have this blessing of these resources coming in. But also use this moment to help you navigate to what is the next thing that’s coming down the pipe for you. And it’s okay, by the way, if that changes. Y’all know when I started working in public accounting, I thought I was going to quit working at 50. So, I started saving like I was going to retire at 50. Now that I’m at the cusp of being 50, no way in heck that I’m retiring. However, I’m so thankful that my 22-year-old self was doing and living that way because now I can do whatever the heck I want and do it for value, do it purpose. And it just makes it build abundance in a complete, in a fulfilled way that I don’t think a lot of people get to go in that hallowed air and experience.
But then I’d also encourage you, Michael, because you need to do some exercises. What makes you happy? Because a person who makes six figures in your early 20s, there’s a lot of whispers from the market that, “Hey, go spend more, drive this car, wear this watch, wear these clothes. This is what success is.” Go watch, was it Margin Call or some of those? I’m trying to think because there’s a movie that we watched, Bo, where it had the guy talking about how he spends a million dollars, and he still feels so broke because he bought a fancy car, bought a nice place in New York. It was kind of amazing. And I see that all the time.
And we’ve interviewed some interesting people. We have an Alex H. interview coming out in the upcoming weeks. And one of the things we asked Alex, we were like, “What’s something fancy or expensive you bought that you were disappointed in?” And it was a Bentley. He dabbled in the Bentley, and he’s like, “Yeah, I got rid of that six months later because it just wasn’t for me.” I’ve heard Mr. Beast say the exact same thing. And it’s funny, too, when you see those videos where he’s wearing all the designer stuff, and then he realized, “What am I doing? This is not me.” So, I want you to explore what actually makes you happy because I do think at this point, you can give yourself more grace.
If it is the cup of coffee a day at Starbucks, see, you know, do it. You know, do that. Exploit all the opportunities to do that. But if driving a fancy car is not the thing that makes you happy, you don’t have to do it. I think that’s missing from the marketplace a lot of times is that they tell you what they think rich people do. But I know a lot of wealthy people, and I think you’d be surprised. As Brian says, books like The Millionaire Next Door, Everyday Millionaires, you find out that real wealthy people, they don’t have to. That’s why we’ve shown. We’ve reacted to clips where it talks about the richer Jay-Z is, the poorer he looks.
Look at all the billionaires that are walking around in hoodies and all the other stuff. Now, look, they might have a yacht that they’re wearing the hoodie on, but they at least went through the exercise to figure out what they liked. And then I would also, as a young 20-something, you need to look around and figure out who you’re hanging out with and what brings you happiness. Because I live in a neighborhood where I think I’m doing pretty good compared to my neighbors. But I’m happy as I can be. I’m not swimming upstream anymore because I’ve got friends, I’ve got neighbors I like being with.
I could go. I came really close because my builder builds beautiful houses, and I got to be friends with my builder. And he builds for a lot of these country music stars. And he was building a brand new development. And he’s like, “Brian, I’ll swap you the house. You give me a little bit of money. I like working with you. I’ll get you in this brand new neighborhood, and it’s going to give you some acreage.” Because, you know, I live on a postage stamp in the Valley of the country music stars on a postage stamp, while they have all their hundreds of acres around me. And my builder was like, “I’ll get you some acreage.” But then I was talking to the superintendent that I’m friends with, and he’s like, “I was like, do those neighbors, you think, are they…?” Because there’s already three or four people, and some of them are pretty prominent people. I was like, “Do they talk to each other? Do they, like, hang out at night with each other, take them lasagna?” And they’re like, “No, they all travel. They do stuff.” And I was like, “I’m not. I don’t want to be in that neighborhood.” And that’s what, so I would encourage you, Michael, look at who you hang out with. Like, if you’re best friends with your high school friends or college buddies, and they’re not, but you’re happy as you can be with them, you don’t have to keep swimming upstream. You just figure out, spend a lot of time figuring out what makes you happy so that you do that, not what the world of consumption tells you. But do what does make you happy a lot, but also use the navigation of the Financial Order of Operations. Because a lot of this, if you follow this “what to do with your next dollar” through the Financial Order of Operations, you’ll end up at Step 8 exactly where I am.
Remember, this all happens post-25%. You know, you get to move to Step 7. You’re going to be able to do that easily, and it’s the type of money you’re making. Because the other thing I like about being in your 20s, this is the only time in life that, you know, if your buddies invite you to go on vacation and maybe I’m projecting too much from growing up with not a lot of resources, but if, you know, four or five buddies say, “Hey, we’re going to go get a hotel room down at the beach. You want to come?” And they’re like, “But there’s only two beds.” Like, “It’s all right. I’ll bring a sleeping bag. We’ll figure it out.” It’s the only time in your life you can do that. I’m going on a trip this afternoon, and I’m all stressed out about is there a bathroom attached to my room because I’m just at that age. I grew up with so much flexibility where I could sleep in a bathtub, I could sleep on the floor, and be happy with it. Now that I’m approaching 50, I’m soft. I mean, I need plush, and that bothers me.
So, I would encourage you to lean into your dynamic flexibility in your 20s, to do and appreciate anything. And it really is a liberating thing because it lets you kind of figure out what you want to do with your money instead of letting the money determine what to do. Because that’s the worst thing that can happen is you get on this hedonic treadmill, you do things too fast, you burn yourself out on all the achievements and successful things, you reward yourself with too quickly, that you realize and you get despondent with the fact that maybe things are emptier than you realized if you’re basing it off of materialistic decisions. And I’m excited for you, Michael, because there’s a lot for you to learn there. Nine minutes, did I really go nine minutes on this thing? I apologize, Michael, but you can tell I have a passion for making sure you get the best version of yourself, but also understanding that you’re focusing not just on the mathematics or what you can do, but also on the emotional as well as behavioral things that will get you to the best version of your future self. For more information, check out our free resources.
