You’re 28 Minutes Away From Never Being Broke Again | Ep 946

0:00Your money goals are too small and I will prove it to you. My name is Alex Hormozi. I run a portfolio of companies at acquisition.com. They generate over$250 million per year in revenue. I did a book launch 12 weeks ago. I did$106 million in a weekend and I broke a Guinness world record for the fastest selling nonfiction book of all time. So in this video, I'm going to explain how you need to rethink your income, your investments and savings goals and timelines. And so here's the problem. A lot of financial gurus, even people on this platform, right? And I have no shade, right? We'll tell you to save$100 a month.

0:27And they'll tell you that if you do that from the time you're 18 until the time you retire at 67, you'll retire with a million bucks at a 9 % compounding rate. And that all sounds great until you realize that when you're 67, that$1 million is going to only be worth$170 ,000. So why is that? So just$1 in 1975, 50 years ago, has today's equivalent purchasing power of$6.02. That's a 6x difference in 50 years. The main reason? Inflation. The dollar. They don't make them like they used to, right? And I'll give you a hint. It goes up. So this measurement is conservative. This is based on the last 50 years, not necessarily the next 50.

1:03And so if that's the problem, how do we solve it? So this is kind of the new way I think about your goal. Let's say that you had the goal to have a million dollars. Obviously, add or remove zeros as it suits you, right? So some of you might be 10 or 100 or a billion or whatever you want. Let your heart, you know, go wild. But let's say that you wanted a million dollars when you retire. So you can live passively on 50 ,000 bucks a year from investing it in a bond or something that's relatively low risk. And that$50 ,000 of passive income, oh yeah, that's only going to get you about$8 ,000 worth of stuff.

1:31Tough to live on that per year. So let's say that you were a little more ambitious and you said you wanted$4 million. If that was your goal, like it was for me, you might want to adjust it and take into account the inflationary reality. So if you want that 4 million bucks when you retire, you probably need 24 million. That's a big difference. Again, that's just because you're thinking in today's dollars, not future dollars. I want to give you some good news. Compounding is still a thing and it still matters. You probably just need to do more of it and do four important things. So think of this as your strategy to mitigate that so that you can actually get where you want in terms of your savings, your investment, and ultimately the freedom that you're looking for.

2:10So consider this the new strategy. So I'll give you the quick and obvious ones that you've probably heard, but in a new way, and then I'll wrap up with what I've actually done to achieve it. Okay. So number one is you have to increase your income. So a lot of people think about this in terms of savings, I think it's much more powerful to think about in terms of income. Because like, if you're not making a lot right now, there's not a lot of room between zero and you. There's an infinite amount above that. Let me put this in real world terms. Even if you don't think that extra 1000 bucks a month from, you know, flipping stuff online or making content and just getting some AdSense revenue, or, you know, promoting school and online platform to help people start communities and getting commissions from that, it won't matter, right?

2:44If you don't do anything with it, right? But if you take that extra 1000 bucks a month, which might not seem like a lot, depending on where you're at, that work might not seem worth. You'd be like, oh, that's a lot of hustle. I got to Uber more. I got to DoorDash or whatever, right? If you invest that extra$1 ,000 a month in that same equation, you get$10 million by the time you retire. This is going to be juicy. $1 ,000 today, if you're 18 years old, is$80 ,000 in 50 years. So the money that you make and spend now counts 80x, but we can't be one-sided. We also need to realize that 80K in 50 years is only worth$13 ,000 today.

3:16So in reality, every$1 you save today is worth$13 when you retire. So for me, this makes making that extra $200 for a gig where you do a DJ thing, right? Or helping your buddy move or whatever is actually a$2 ,600 investment. And it makes it far more worth it for me, or at least when I was thinking through my saving stuff when I was starting out. So number one, we got to increase income. Number two, and it kind of naturally leads to it is that you got to stop spending so much money. Now, on the other hand, right? If you think the$500 belt that you wanted to splurge on doesn't matter, just remember that it's 40 grand in 50 years, right?

3:48And in today's dollars, it's$6 ,500. That$500 belt with compounding, reverse back to the present, is$6 ,500. And so here's something that's even worse. A$500 a month car payment, that's a lease. That three-year lease is$18 ,000. That$18 ,000 in today's dollars, when you retire, is$234 ,000. Wild. 50 years, obviously. And that's just one lease. So even if you make less, it doesn't mean less when you're young. And this is the point that I think really discourages a lot of younger people is they're like, I'm not making as much money as I want. You know, I wish I could make more. They want to flex the small amount of money that they've got because they're like, first off, never flex when you're young, because everybody who's older has way more money.

4:33It's just like, you just have more time to accumulate. You just do, number one. You have more time to accumulate. Number two, you earn more when you're older because you have more skills. But the thing that really matters that people who are older don't have is you have time. And so the value of the money that you make, even if it's half as much, the difference of that last 10 years of compounding when you start at 18 versus starting at 28 is the difference between a 30X, 33X and an 80X. Think about that for a second, a 33X and an 80X in terms of that 10 year difference. And so just because you make half as much or a third as much as you want to make right now, it doesn't mean that those dollars aren't worth more to you.

5:08And so I just I say this to encourage you to like make the extra few bucks here and there. Spend like don't spend as much. You know, you got to the club. Just get the like just pregame a little harder and and get a soda with lime. All right. Like you don't have to go crazy with it. All right. So number one, increase income. Number two, stop spending as much and then putting it in future dollars relative to today's dollars. Hopefully should soften that blow for you. The third is try and make it and save it faster. Right. Because the money you make now versus the money you make when you're 10 years older hits harder.

5:40So there's obviously a time value to money. So three quick strategies. One, set a watermark. Invest the rest. So it's like, I need to have$5 ,000 in my bank account. Everything about$5 ,000, I invest, period. Or an alternative way of doing it is saying, I have to invest$2 ,000 every month no matter what. I got to make it happen and then I'll live on the rest. I will tell you that the richest people I know think in terms of the second way more than the first way. All right. which is like, I'm going to go make that money to get that thing or to make that investment rather than I'm going to take it out when I got.

6:10Just something that I've noticed. Now, either way, just pick a strategy. Now, the next one is that my examples assumed $1 ,000 per month didn't go up by 3 % a year to adjust for inflation and didn't increase in earning power. So you can absolutely run a separate model for that with your own Excel sheet or your own, you know, whatever AI you use to run a model on that. So if you're like$1 ,000 a month. If I do that from 18 until I am 67, I'll have 10 million bucks. So you could probably hit your goal or beyond that with just that tiny piece. Now I gave you, I said I had three strategies. I gave you two of them.

6:44I said, invest the rest, right? Or invest first and then live on the rest. Either way works. Invest first and spend the rest or invest the same amount every single month and then increase it over time. All three of those are fine. Totally fine. And honestly, if you just pick any of them, you'll probably, it's like, if you're literally the type of person, what's funny is that like I see entrepreneurs, I see people all the time, like people want to know if they're going to be successful. Watching these videos and actually taking action 99 % of the time like that, that's all that actually meant. Like the fact that you care enough to actually change your behavior is the big green flag indicator.

7:15You're going to tweak over time, you're going to learn other stuff, but actually doing something about it is what will separate you from everyone else. Let me give you the fourth strategy. All right. Which is what I actually did. All right. So I'm obviously not 67 and I have more than$10 million. I made my living expenses as small as humanly possible. All right. So protein shakes, Chipotle, I split a bedroom. All right. So I lived in a house and I had six roommates. And then within one of the rooms, I split the room like college style, like dorm style, because it was cheaper. Right. And I was never there anyways.

7:50I was working all the time. I owned a used car that I paid. I paid for outright. So the only thing I had was my car insurance. That was it. But the actual I know car payments, I haven't had car payments in a very long time, like buy a used car that's 10 years old, that's in good condition, pay 10 grand for it, and then just like never have a car payment again. And then I invested my money, pause, in learning to make more money, you want to increase your income, right? But how do you really do that? Because when you factor in that it's one of the only things strong enough to break this cycle is that you just have to make more.

8:24So think about it. Like if you spend$2 ,000 having someone help you learn how to sell, ideally a place with some sort of, you know, placement assistance. I remember for me, I spent$750 per hour for eight hours to have a guy who really knew how to do ads at a higher level. Because remember, this is a guy who's going to charge$750, not your buddy, right? You might be able to just buy a Chipotle and he'll do it for you, right? But to have somebody who actually taught me how to run ads at a high level. Those eight hours, that tutoring, that skill that I was able to learn from that one-on-one tutoring made me hundreds of millions, not just hundreds of millions, literally.

8:56Now let's take the other example I had a little further. Let's say you invest that$2 ,000 in learning that skill. And that$2 ,000 takes you from a$30 ,000 a year income to a$90 ,000 a year income. And post taxes, at least in the US, that's about$75 ,000 a year, assuming you live on, let's say,$2 ,500 a month because you're live in lean. That's$35 ,000 per year after taxes, after expenses that you can invest on for the rest of your life. So that$2 ,000 one time gave you a permanent$35 ,000 per year increase in investable income. That is how you get the absurd returns that can get you out of the cycle.

9:34And so put this in perspective, if you did nothing else and you invested the$3 ,000 a month, roughly, That alone would get you to$31 million in 50 years. And that's with zero races, zero new skills, and zero increase in opportunity. You literally just doing the exact same thing for 50 years. And so the idea here is like you want to use compounding to your advantage. And the way to increase how much you can invest is to make more, spend less. And in the short term, where you will get the highest returns, actually over the long term, where you get the highest returns and the short term is in skills.

10:06But people are so afraid of investing money in skills. And I really want to dive into this because I truly want to help. So yes, you can absolutely achieve financial freedom if you live under your means. You invest the difference into increasing your income. And then once you have the amount that you need to compound to your number, you can just let the compounding work. You'll realize quickly that you get higher return on learning skills than anything else. So then you put as much as you possibly can into it. And so for many of you who haven't had that reinforcing cycle, that one time where you spent money and you made more money back.

10:38I was very fortunate that the first thing I ever spent money on, I made more back. And so I got very addicted to buying money, basically trading money for skills that I would immediately be able to make more money and increase my income. Because it does. Don't get me wrong. I mean, in a lot of places, it's successful. It's still a cheaper alternative to learning realistic, real-world skills than higher education. So if you were to spend$100 ,000 on courses and coaching, for example, or tutoring, which is how I prefer to do it, by the way, after doing some research, as in like, look on line, like make sure people have good reputations, make sure they have testimonials that are people like you and many, many of them, they don't promise too much, right?

11:15I'm convinced that your life would change far more than$100 ,000 of higher education. And I do think you can learn a lot of stuff your own to be very clear when I was coming up. But the thing is, like, this is me trying to provide whatever value I can in terms of like my path is that I was just always willing to pay for speed, right? Speed and the time value of money is something that I think people just wildly underestimate, right? Like if you can increase your income for like you get your five your increase in income in one year, the difference is the value of that learning. And I just, I don't know why people don't get this.

11:44I think Charlie Munger and Warren Buffett had a little moment where he was like, if people weren't wrong so much, we wouldn't be so rich. And I think, so I'm trying to like, I've never really understood it. And so maybe you guys can help me understand it. I think the big reason is that people are afraid of spending money and not getting anything back. I think that's the big fear. I think another part of it is ego saying, saying, I don't need anyone's help. I can figure it out on my own. And here's the reality. It's like, you can figure it out on your own. The question is whether you want to figure it out in the amount of time it would take to figure out.

12:13Like, I'd rather just have somebody who already derived calculus to just teach me how to do it, right? And the thing is, is that with good feedback, you can get your goals significantly faster. You will always lose until you learn, then you win. That's how winning works. But you have to be willing to lose in order to win. And so I have a relatively extreme stance on this, which is that I will spend, when I was coming up, I lived on basically nothing. And I spent all of my money. And it essentially meant like almost had no savings for like years and years and years because all my excess cash I just gave to people.

12:48And for sure, I had people who were like, that wasn't worth it. That wasn't worth it. But I tend to always come from the perspective of like, how can this make me better? How can I get an ROI on this? Do the opposite of that. And so this is like you will make mistakes and you will buy things that don't immediately work. But I think of skill acquisition like a bridge. So let's say that you're, you know, you're on this side and you're sad because that's how bridges work. You're always out on one side. And then on this side, you have dollar signs for eyes, which means you're happy because money brings happiness, obviously.

13:25All right. And so, and so here you're sad. Maybe we'll cross your arms because you're super sad, right? Most people will look at this bridge and say, well, I bought this one and I know how to do this one already and this one. Why can't I get across? It's because you got missing links. And so let's say you buy something else and you get some tutoring and then it adds this brick. Was it a waste of money? Well, you still can't get across. It's a waste of money. No. Just like Like your arithmetic teacher wasn't a waste of time before you learned calculus or before you learned algebra. You need one in order to get there.

14:01You need their stepping stones. And so what happens is, is that you get this other one from the sixth thing you buy and then the seventh and then the eighth and then the ninth. And then what happens is you say, oh, this guy who taught me this ninth thing, that guy is the truth. But the reality is that the reason that some people get outcomes and some people don't by going through the same thing is the skill gaps that exist in someone's skill set are what create different outcomes with the same education. And so the problem with an inexperienced teacher, and this is very common in the alternative education world, is that they will accept money no matter what.

14:37But if I were to teach you Spanish 6 and I'm very good at Spanish, but you've never taken Spanish 1 through 5, am I a bad Spanish teacher or are you just not good at Spanish 1 through 5? What should have happened is I should have said to buy Spanish 6, you've got to go through Spanish 1 through 5. But the thing is, is many of these alternative education businesses only know Spanish 6. They don't even know how to teach Spanish 1 through 5 or they never had before, never thought about it. Because they get one out of five people get a result. So they say, this is good enough. Everyone else didn't try.

15:04And to be clear, there's definitely people who don't try. I don't want to say that's not true, for sure. But there are also people who do try, but just didn't have the missing links. And so part of the process of going through the alternative education world is having the perspective of a collector of skills. And as long as I see myself as the asset, I'm always going up. And once I have all the pieces together, guess what follows? The dollars start walking across the bridge and they keep going into your pocket. There's your pocket. There you go. And so to me, this is what I mean when I say like invest your money into income earning skills.

15:39If you can trade the skill for money and you can learn it, can you imagine something that's more valuable? We just did the math on like getting$3 ,000 a month extra from one skill. Imagine adding 10 skills. Imagine that sales guy says, you know what, that$3 ,000 a month extra, instead of saying I'm going to invest that three, I'm going to spend six my next two months of it. And I'm going to spend it on learning how to run ads. And you know what? And so I'm going to spend another two months on learning how to do that. Like, I just always saw the money that was left over every month. It's like, what skills at the store do I need to go buy?

16:11And then I would just go buy them. But one of the big unlocks that I had in my career was that I went to an event and there was a guy who was there. The event was for everybody who was doing over eight figures is what it was for. So everybody's 10 million and up. And at the time, Layla and I had just started making money. I'm talking like within the last 12 weeks. and everything just started ticking off, right? I finally got the last piece to connect. And so we were doing three or$400 ,000 a month. I can't remember, but it was almost all take-home because it was just me, Layla, and I had one assistant over at kitchen table.

16:40Like that was the business. And we'd just gotten married. I was like living large. And when I say living large, like I spent no money, but I just felt not poor anymore, which was great. So as I go to this thing, I was like, I don't even know if I should be here. I'm definitely not making that. They're like, oh no, you're gonna be way past that. And I was like, I'm glad one of us believes that. I was just, you know, trying to ride this rocket with both hands. And so anyways, everyone goes, you know, goes through their presentation. And the first guy who got up, because I remember he was like busy.

17:08And so he like, I can't, he either want to go first or last. Doesn't matter. And he gets up there and he, and he starts by saying like, so we did$35 million in revenue last year. And I was like, what? $35 million? Like, I was like, one is dope. You know what I mean? I was three months into making, you know, pacing higher than that, but I never actually really had it happen, at least from an income perspective. He gets up there and after he gives his whole presentation, he was in the e-commerce world. Someone asked him, so where you're at now, like, what are you doing to invest in your education?

17:40Like, what are you doing to invest in learning? And he said, I made a decision a long time ago that I would have a learning budget. And so every month, whatever percentage you're comfortable with, he's like, you know, maybe it's 1%, maybe it's 5%, maybe it's 10 % of my income. He said, I forced myself to spend it. and I spend it in a way that's testing something that I think is cool. And so that might mean like, he's like, I'll test a new ad strategy, knowing that it probably won't work, but I'm willing to lose that money to continue to experiment and stay ahead. What's crazy is that I took, I went to that thing, I heard him.

18:08And then for me, I was like, okay, well, I'm going to go experiment with my income. And so remember, I wasn't spending much money and I had a lot of income. And so I took like, you know, 10%. So I think it was like 300 ,000 a month. So 10 % would be 30 ,000. And so I was like, I'm going to increase our ad spend by$1 ,000 a day. And we were spending like$400 at the time. So I went from like$400 to like$1 ,400 a day in ad spend. And that is when gym launch went from$300 to$480 to$780 to$1 million to$1.2 to$1.5 to$1.7 something to$2 million,$2.2. That was months. Because as soon as I saw that happen, it was like, oh my God.

18:46And so part of me literally just being willing to lose the money unlocked my ability to spend more money, which scaled the company. And so once I had that, obviously, a very reinforcing event for me, I was like, where else can I spend money like this? Like, where can I can I can I buy access to a room? Can I can I pay for somebody's time on one? Can I can I go to the event? Like I did everything because every time I went, I made more. And that's what I want for you. That's really it. Is that like you're going to need to make more money than you think. it's going to take longer than you think, but you can make it happen significantly faster if you learn skills that pay today.

19:22And I'm willing to pull cash from my future forward. And even though I know that$1 ,000 is worth$13 ,000 in 50 years, I know that that$2 ,000, if it can make me an extra$2 ,000 a month, will be worth something like, well, just let's just say a lot, a lot of zeros, a lot more than 13x in 50 years. I think people don't want to spend money on skills because there's lots of pain on both sides. So it's like I have to, I know what I'm giving up. So I'm giving up money. I am giving a certain money away that I have immediate utility for, for the hope that after I give up even more time and effort and go through failure to learn this thing, I will have something that I'm not sure of will be better that I cannot define yet.

20:06So it's just a lot of uncertainty. And I will say this, that if you want to get in the entrepreneur game, like you just got to get comfortable with uncertainty because the game of entrepreneurship is risk and time. That is the game. So if you're like, where do I, where do I look to find these skills? All right. So I'm going to just give you places. So number one is like, let's just start with, with, let's, let's go up the money ladder here. All right. So at your base level, what's, what stuff's free and only costs time. All right. This is where you've got school communities that are online that are free to join.

20:39You've got, you know, you got forums online that you can go look through where people are, you know, teaching each other stuff. You've got YouTube videos like this where plenty of people have done deep dives, masterclasses, et cetera. Like if you want to learn sales, like you can probably go through my sales. I think it's like eight hours or something like that of just all my sales trainings. You just go through it. It's free. You will get more help and you will move faster if you have someone who can give you feedback, right? Like effort plus feedback is the loop, right? Because if you have feedback only from the environment, you might take very little action because you're so unsure.

21:11But if you can take lots of action in an artificial environment and get feedback, you can go through 100 loops rather than one a week, you can do 100 a day. And that's where you get so much better, so much faster. Like the reason that I got so good at sales was because I started selling in the early days of Facebook ads. And so I was doing 20 plus in-person consults per day. And I did that for years. And so that kind of exposure, that kind of feedback loop, like I got good. The first sales training I actually bought and purchased, I actually purchased for my team because I was like, I don't know how to teach this stuff.

21:40Right. And it took many years for me to get that. And then when I saw their teaching, I was like, I can make a better version of this. And then that's what got me into learning, like basically learning how to teach. But that's the first year here. The next tier is like, I would say like the, call it$10 to probably like$200 per month type programs. Again, school has stuff on this. Programs out there that are kind of like, they call them like low ticket communities. These are great because like communities already aggregate a lot of the information for you. And so these are places to go. They'll usually have some education and some sort of feedback mechanism.