Wallet Hacks

If You Aren’t Breaking Up, Screwing Up, and Leveling Up In Your 20s, You’re Doing Something Wrong

One of my favorite bloggers is Mr. Money Mustache and he, along with folks like Jacob at Early Retirement Extreme, are the leaders of a tribe/movement know as FI/RE (financial independence, retire early).

They resonate because they challenge many mainstream ideas and assumptions – something everyone should do. I don't agree with everything they believe in, respectively, but I do feel like they're kindred spirits on a lot of ideas.

It was fun when I saw Pete weigh in on a recent article in Elite Daily titled “If You Have Savings In Your 20s, You’re Doing Something Wrong,” by Lauren Martin.

Here were some of the ideas from Martin's article:

“When you die, you can't take money with you.”

“When you live your life by numbers, you strip yourself of poetry.”

“We're young and we're reckless, We'll take this way too far, It'll leave you breathless, Or with a nasty scar”

OK, so the last one was a line from Taylor Swift. 🙂

My point in sneaking in a little Swifty was that Martin's article is what I call “permission advice.” There's little you can do with the information she presents, but it gives you permission to feel those feelings you have inside but don't feel comfortable expressing.

Everyone loves to have fun. No one likes to restrain themselves, let alone their spending. We want to live life!

We just don't feel like we're allowed to. You're supposed to be working.

Taylor Swift is popular because her songs give people permission to express feelings they have without putting themselves out there. Listen to the words of any of her hits and you'll notice a trend. (by the way, this is true for any major artist… Rage Against the Machine anyone?)

I feel like Martin's article felt good to read, it expressed the cynicism and antiestablishmentarianism lots of young professionals are feeling, but when you were done the bad blood still exists and you're left trying to fill a blank space.

Let me try to fill that space. Your 20s should be about experimentation with your life and lifestyle so that you're set up to take advantage of it in your 30s and beyond.

Breaking Up

Don't buy into “traditional” retirement.

Traditional retirement is where you work for forty five years, from 20 to 65, and then stop working (retire).

The biggest problem with that concept is the fact that it even exists.

That's about as realistic as working at the same company for forty five years. You won't. Nor should you, your best opportunities come with moves as your reset your salary to your market value (especially if you level up).

I never got more than 3-5% raises during my three years at Northrop Grumman (and the year I got 5% I was told I should be thrilled because “raises were not good that year”). My salary jumped 20%+ when I went to Booz Allen Hamilton, in part because I leveled up with a security clearance (biggest contributor) and new in-market skills.

Anchoring is a well-understood cognitive bias where people have a tendency to rely heavily on the first piece of information. In this case, it's your base salary. When they go to consider raises each year, they're biased by how much you make now. When you switch, you reset that anchor.

The second biggest problem with traditional retirement is that if you think you're going to be working in the salt mines for forty five years, you think you need to cram all of the fun into your 20s.

You don't.

In fact, your 20s are the worst time to cram all of your fun because you have the least amount of money and don't take advantage of your biggest asset of time.

A better way to think about retirement is to grind hard in your 20s, switch jobs as you need to, level up, build up income sources, and then glide into full non-working retirement, if that's even something you'll want to do.

Screwing Up

You will screw up. You will fail.

In fact, if you don't screw up, that's a screw up in and of itself.

When you're 20, supporting just yourself or perhaps you and a significant other, the downside risk of screwing up is low. Your expenses are low, your time constraints are low, and so taking big risks is far more palatable.

Fast forward to your 30s and 40s and your life will be different. You may be married with kids or have a large mortgage loan to service each month – now the risks are magnified. You have people relying on you to be winning bread and so some chances are taken off the table.

You want to be experimenting and testing now, when a failure won't really hurt anything other than your pride, so that you can put something in place when you're older and have more to lose and less time to lose it.

And overcoming how failure hurts your ego and damages your pride shouldn't be overlooked. More than anything else, this stops so many people from taking action.

The story shared by Dustin Hoffman in this video (it's an excerpt of his MasterClass and shared by the New York Times) captures something I firmly believe in:


Your control how you get to where you are and what you do after, but the moment of success and failure is often out of your hands. So keep on swinging. And swinging.

Personally, and if it helps, I am motivated by regret minimization. I think back to all the events in my life where I wished I had taken a chance, rather than sit back. I have plenty of those in my life, I'm sure you have plenty in yours.

Let that be the fuel to push you to act. To try something crazy and new to expand your horizons. Except jumping out of a plane, that's crazy and I'm never doing that.

Leveling Up

You're in a game right now. You have time, you're trading it for money. That money will itself make more money. You win the game when your money makes enough money to pay for the things you want.

When you're young, the time to money trade sucks. Minimum wage is $8 (let's not even talk about taxes), so every hour of your time is only worth $8.

Your 20s should be spent learning and growing so that your time to money conversion rate is as high as possible while maintaining a reasonable qualify of life.

Everything you do should be setting yourself up. The steps you take today, you will be able to take advantage of when you're 30 and 40 and beyond. You should not be doing anything short term unless you have a compelling reason, like you want to pay off debt.

How do you do this? First, we need to break down your various money engines.

Your primary money engine is your job. It's where you're spending the most time and where you're going to see the best results.

When it comes to your job, there are two things you should be doing in your 20s. The first is figuring out if this is something you will want to do for another five. Is it a career or simply a job that'll tide you over until the next one?

If you don't see yourself in this line of work for five years, you'll want to find a new path. You don't want to make investments, changing your trajectory, in something that you won't be doing in five years. When you're 20, switching careers is easier than when you're 30 or 40.

Second, if it is what you want to do, you need to chart your path forward in this career by directly asking your superiors as well as studying the career paths of those ahead of you. It's like a young basketball player patterning his or her game after one of the greats.

When I was working for Northrop Grumman, I started an MBA at Johns Hopkins. Why would a software engineer at a defense company need an MBA? (they don't) Defense contracts equated an MBA with ~2 years of field experience and Northrop Grumman was willing to pay for it, I just needed to take the classes. By getting an MBA, I was skipped two years and shifted my trajectory.

Why do people go to college? To change the trajectory of their earning power. A college graduate will out earn a high school graduate, on average, by a significant margin. The Pew Research Centre estimated that a college graduate aged 25 to 32 will earn $17,500 more each year.

That difference will only grow and your goal, in your 20s, is to find similar ways outside of college.

Take a hobby or strong interest, start a side business. If you don't see a way to spend time to level up at your day job, or you aren't sure what you want to make your day job, consider a side business.

Side hustles are great but remember that if you're spending 40 hours somewhere, you get far better return improving the your hourly rate there.

One Last Thing… Everything is Math

Why do people hate math? I feel like I'm in high school where everyone complains about doing badly on the test but secretly everyone did better than me.

“When you live your life by numbers, you strip yourself of poetry.” is one of the subsection titles in Martin's article – her point being if you focus on the numbers, you miss out on enjoying life.

Yes, I agree, but she's making a strawman argument against an extreme and, ultimately, everything is math. Numbers are behind everything.

I remember when sabermetrics, the application of statistical analysis to baseball, was first being tossed around as this fun new idea. You had the numbers geeks (my people!) and then the baseball “traditionalists” who talked about a player having five tools and some other sexy baseball catchphrases.

Then a few teams started using it, most famously the Oakland A's as described in Money Ball, and now everyone does.

Numbers aren't sexy, but they never lie.

Every single day, you have 24 hours. Let's say you work ten, then take another ten for eating, sleeping, working out, whatever. That leaves you with four hours every single day.

Now go have fun two hours every day, that leaves you with two hours a day.

That's 730 hours a year.

Do something with it instead of letting it disappear in the noise of life.

All those moments will be lost in time… like tears in rain.

Ok ok, this really is the last one… Find Your Balance

Find your balance between working and playing.

Martin was right in that all work and no play is not a good thing and Pete was right that your 20s are the time for work. Find a balance between the two that works for you.

I think your early years are for grinding hard so that you can glide into retirement, but that might not be your style. That's mine. You should try it and discover what balance is right for you so you don't burn out and don't squander opportunities.

Either way, your 20s are about exploring yourself and learning what good habits you can develop that will endure. It's about quitting jobs until you find the career path that resonates with you, one that will push you to work hard and deliver.

How did or how will you spend your 20s?