Hey readers!
I’ve learned a lot over the last 30 years. So today I’m sharing with you:
- The 5 stages of investing in yourself
This is the path to wealthbuilding I would use if I were starting over again today.
Let’s dive in!
I love hiring and working with young people. People early in their careers have a drive to learn and grow, and flexibility that keeps them from getting stuck in a rut.
Of course, that’s not true of every young person. But I look for what I call “cuspers” — young, hungry people who have the skills, but haven’t been given their shot at responsibility yet.
At this stage, a lot of these people are starting to build their savings for the first time.
And while I don’t go around pushing financial advice on anyone, I’ve been asked how to think about investing in yourself.
What do you invest in, and when?
The answer depends on the stage of your journey. I think about it in these five stages.
The 5 Stages of Investing In Yourself
Let’s assume you’re starting early in your career without a ton of cash. I’ll go through each stage broken down by net worth.
(Also: this is all in US dollars, so convert if necessary!)
Stage 1 — NET WORTH: $0-100k
Your objective: Optionality.
You’re just starting out. Probably with a job that pays OK, but not fantastic.
At this point, do whatever you can do live beneath your means.
Save a ton, until you get ~12 months of living expenses socked away in the bank.
At this stage, don’t tie it up in investments yet.
You want to keep it liquid, so you can safely start a business in the next step.
Stage 2 — NET WORTH: $100k-250k
Your objective: Cash Flow.
The best ROI on your money is starting a business.
Be smart about what you choose. Pick one type with a proven model, and low capital requirements up front.
Think an agency, brokerage, productized service.
Don’t try to reinvent the wheel here — “boring businesses” are great. Even better is taking an already successful business model and finding a unique twist.
If you need to, do this as a side hustle until you can quit your job.
I wrote a short ebook (or maybe a GIANT pamphlet?) on my method for starting low-risk businesses. It’s available here!)
Stage 3 — NET WORTH: $250k-1M
Your objective: Become Unemployable.
Your goal now is to reinvest in your primary business. Go all-in on growth to make that business as resilient and efficient as you can.
When you go all-in, you will likely feel like you’re in over your head.
To solve this, invest in joining a CEO peer group. There are tons of other business leaders going through exactly the same journey as you. Swap strategies, resources, networks, and you’ll be amazed at how confident you become. (Until the next thing goes wrong… but then you have a support group who will understand.)
When you make money from your business, reinvest it where the ROI is still high.
Keep the rest in cash… for the next step.
Stage 4 — NET WORTH: $1M-10M
Your objective: Asymmetric Bets.
By this point, you should have a healthy cash flow from your business.
But past a certain size, investing in your business may not be the best ROI. If it’s a services biz, for example, you can hit a ceiling.
It’s time to start deploying your cash in places where a little could turn into a lot.
Look for places where your money can compound for long periods (20x+ returns) to hit the next level. Things like product businesses or high variance real estate.
The point here is to make multiple bets, assuming that some — or even most — of them won’t work out.
Because if your bets are in the right place, you only need to win one or two of them.
Stage 5 — NET WORTH: $10M+
Your objective: Be Antifragile.
If you’re lucky, some of your asymmetric bets have hit!
Your goal now is to be unkillable.
This is the stage where you should diversify.
- Buy cash flow real estate (directly or as LP)
- Own big %s of other businesses
- Invest in public equities
If you want, do more asymmetric bets. But put some of your money in places that can weather economic ups and downs, so no matter what happens you can land on your feet.
One approach here is to make countercyclical investments — for example, luxury goods that do well when the economy is strong, and staples like groceries that do well when the economy is weak.
The investment you should always be making
These 5 stages don’t happen quickly. We’re talking 10+ years at least.
But there’s something you MUST invest in at every stage:
Personal growth.
Learn. Read a ton of books. Listen to smart people. Join groups where badasses gather – try to be the dumbest person in the room.
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At the end of the day, you can get rich by selling your time and saving. You get wealthy owning things that appreciate in value.
This is a path to the latter.
And exactly how I’d do it if I started over today.
Thanks for reading, and have a great week!
Michael
