How To Invest In Yourself To Make Money

Every decision we make in life is an investment with a cost and a payoff. We can invest money externally in the stock market or real estate, but choosing to invest in yourself arguably carries the highest return on investment — especially when you're young.

That's because, for most of us, our largest single asset is our ability to earn a living. After all, the average lifetime earnings for an American is around $2 million. Of course, that's an average, but let's use some investment math to illustrate my point.

If your lifetime earnings are $2 million, and you invest $5,000 in a course to learn a skill that helps you earn 5% more, your ROI is $100,000 or 20 TIMES your investment. Good luck getting that in the stock market right now.

Getting there means choosing to use your time and money to invest back into you!

Your education never stops.

Higher education used to be how people invested in their future. But with the high cost of tuition and student debt, young people are increasingly uncomfortable with the return on investment. The truth is you can learn anything today.

All it takes is an internet connection and a "beginner's mind". A beginner's mind is a superpower that allows you to view everything as a learning experience instead of feeling like you have to be the expert, immediately.

If you want more money, more time or more freedom, it's your responsibility to develop the skills you need to get what you want. No one else can do this for you.

I put together this guide to share how I think about investing in myself, and give some actionable ideas for you to build a roadmap of lifelong learning.

How I Learned the Lesson of Investing in Myself

In my early 20's I was a prop trader — that means a company staked me to make buy and sell decisions in derivative financial markets for (hopefully) a profit. I loved the markets, but I wasn't particularly good at doing this, and it was an extremely high-stress environment. This was in 2008 to 2009, right in the middle of the financial crisis.

I watched some of the older traders really struggle, and I didn't want to end up that way — something needed to change. I wanted out, but was so worried about the unknowns of switching gears in a recession. I was locked into this idea that my career had to be a linear journey "up and to the right" (the trajectory if you were looking at my life on a graph).

This was until I read a book called, "The Art of Learning" by Josh Watzkin. In particular, there's a chapter titled "Investment In Loss." The basic idea of this chapter is that many times we have to take a step backward (loss) to make a giant leap forward. When you consciously make this decision, you have an opportunity cost that becomes your investment.

In my case, if I quit, I'd be trading my future earnings for a period of time for the prospects that I'd do something better and more valuable by choosing a different path.

I could suddenly view the time and money it would take me to move into a completely new career as an investment in my future, and I quit my job the very next day. I posted a comment about this journey on a Linkedin video, recently. This chapter led me to view everything in life as an investment, and recognize that the more I could invest in myself, the better.

A Framework for Investing in Yourself

From my experience, I've come to the conclusion that investing in yourself is done for any of three reasons:

To create more money
To create time
To create peace

There are high-leverage skills that work on all three layers. I call these meta skills. For the sake of this framework, I'm going to concentrate on the first one. Don't get me wrong, some of the best investments I've made have been to achieve twos and threes. But my view is that all three work together in a reflexive cycle that starts with having more money (or at least enough). In the beginning, to make more money you have to trade your time and/or small amounts of money to acquire new skills that make you more money. Here's what this framework looks like.

Here's how time, money and peace work together.

When we're just starting out, we usually have time and no money. So, we trade our time for money and gain skills that, guided by experience, make us more valuable. As we gain more money, we start to use that money to buy more time or convenience, which gives us more peace of mind, or time to invest in our health and happiness.

Once you attain a certain level, experts say this is around $75,000, this process also works in reverse. Any wealthy person will tell you that investing in your peace — by cultivating a calm mind, good judgement and healthy body ends up making you more money and creates a better balance with your time.

The Ultimate List of Ways to Invest in Yourself

So where do we start? In the sections below, I get into the steps I learned that've been helpful for me. I also break down common resistance points, but to get you started, here's a non-exhaustive list of ideas categorized by my investment framework above.

Platforms to Learn Anything

Masterclass
LinkedIn Learning
Coursera
Skillshare
Books
Youtube
Udemy
Khan Academy

The Most Important Meta Skills (What Makes Everything Easier)

Better decision making
How to read a book
Investing basics
Design thinking
Improved communication
Negotiation
Be mentored/coached
Mindfulness/stress management
Staying organized

Invest in Yourself to Make More Money

These are ideas on how to make more money over the long-term. All of these have worked for me at one time or another.

Learn to invest
Go back to school
Take a risk management course
Learn to budget
Get a raise
Get a certification
Understand compounding and compound interest
Upgrade your resume to get a better job
Launch a product
Learn to build an online course
Start a freelance side hustle and charge for your time
Learn to flip on eBay
Sell stuff you don't need

Invest in Yourself to Buy Time

These are generally investments to make in yourself to create better efficiency, get more done, or have more freedom with your time. It's often easy to dismiss some of these as needless convenience, but if you can get past that resistance and see the ROI on your free time, this category of investment has the highest payoff.

Try Superhuman email
Negotiate a four-day workweek
Use an accountant
Get a virtual assistant
Figure out your effective hourly rate (EHR)
Pay for anything that costs less than your EHR
Take a digital detox course
Buy a Bullet Journal
Order your food delivered
Use Audible to read on your commute
Move closer to work
Build a home office
Hire a cleaning service
Have your groceries delivered
Use a laundry service

Invest in Yourself to Create Peace

We all need more peace in our lives. Here are ideas on how to use your time and money to cultivate more peace and happiness in your life. Ironically, studies have shown that being at peace can help you make better decisions. Better decisions always drop straight to the bottom line.

Get healthy
Use your PTO
Change your career
Take a sabbatical
Travel
Learn to meditate
Use HRV training
Buy experiences, not things
Get organized and declutter your space
Insure yourself (health insurance, life insurance, etc.)
Keep a journal
Optimize your sleep
Start saying "no" more

How to Invest in Yourself — for People Who Need Steps (Like Me)

The best way to invest in yourself is just to start. However, I tend to think in frameworks and steps to sequence my choices to learn if I'm on the right path or if I need to course-correct. These steps have been helpful to me in my self-investment journey.

1. Learn the Difference Between Spending and Investing

Learning this difference is key to your mental framing and attitude toward using money to better yourself and your quality of life.

When we spend money it's usually on perishable goods that we might need for survival, OR on anti-necessities that have a very fleeting payoff. Think: candy, cigarettes, bedazzled iPhone cases, new cars, etc.

When we invest money, we are expecting a durable, long-term payoff in one of the three areas of the framework above. Think: learning a skill, freeing up time to spend with family, getting in shape, etc.

We tell ourselves a lot of stories about money. When I was young, I felt that money was a scarce resource that had to be hoarded. So, I just added money to a pile like Scrooge McDuck, and didn't use money at all. As I've learned more, and had kids that have given me perspective, I've come to this conclusion:

"Money is only a tool, which can be leveraged to help you live the life of your choosing."

Money's only valuable if used productively — and you get to define "productive" use. When I made this subtle mental switch, I got better with using money to improve my life instead of keeping it so my ego could watch my bank account go up. Now, every use of money's an investment to either increase my wealth, increase my time or increase peace in my life.

Action step:

Make a quick list of the top 10 things you spend money on and the top 10 things you are thinking about spending money on.

For each, note the following:

Is the payoff likely to last a long time, or will it fade quickly?
Will the spend make you a better person over the long term?
Will the spend take care of other, smaller problems that are likely to occur over and over again?

If the expenditure improves you as a person, solve problems, and last a long time, you probably have an investment.

2. Draw Your Circle of Competence

Circle of competence is a mental model popularized by Warren Buffett. It describes the understanding of the edges of your own knowledge and capabilities; being truly honest with yourself about what you know and don't know is extremely important.

When we invest in ourselves, we're, by definition, trying to expand our circle of competence. But if we don't know the boundary, we don't know what will expand our circle versus create a different, less-effective circle, that doesn't leverage the huge body of experience we've built over the years.

Defining your circle isn't formulaic. It's just a matter of inventorying your skills, knowledge or abilities, and being brutally honest about what you know and what you don't yet know — what you think you know and what you'd like to find out.

Action step:

Write down a list of your skills. Ask people for help if you need more ideas. Once you have a list, categorize your skills into common buckets such as "communication", "programming" or "digital marketing".

Hang onto this list for the next step.

3. Figure Out Your Highest Point of Leverage

Because what you don't know is infinitely larger than what you do know, the next step is figuring out what you should learn. Since time's finite, there are lots of things you should NOT learn. The goal in this step is figuring out what area of your circle of competence gives you the best growth.

For example, it's very "in" to learn coding skills. I generally agree, and have my kids learning how to code — I think it's an essential skill for their future. But not essential for mine. No matter how much I learn, I'll still need to hire someone better than me to do the software development I need done. So, the time investment isn't a good one for me; it doesn't leverage my past experience, or ladder-up some outcome goal in my life.

My highest leverage points are investing and operations. Any investment I can make to become a better decision-maker or run better systems gives me the most growth in money, time or peace.

Action step:

Take your circle of competence from step two, above, and define the circle as narrowly as you possibly can. For example, "my circle of competence is in hiring, and building and leading creative digital content teams."

By narrowing your circle, you become aware of what you're truly good at now, AND the number of areas within your circle you could get better at very easily.

So, if my circle of competence is in digital marketing, but my highest point of leverage is in building teams, I probably shouldn't learn how to design in adobe photoshop, or learning Java. I'm better off seeking skills that help me lever the teambuilding or operational side of "digital marketing".

4. Identify the Skills You Need That'll Make You More Valuable

Now that you've identified your highest point of leverage, there are various individual skills to learn that'll help you level-up and grow. This step is about deciding which skills to develop.

In the last step I said my highest point of leverages was investing. Within investing there are many skills that I could learn: risk management, making better decisions, charting, real estate investing, stock market investing, cryptocurrencies, hedging, etc.

Action step:

Lay out all of the skills you could learn within this area, that are tangential to your highest point of leverage.

5. Create a Roadmap to Acquire These Skills

Based on your time and money budget, lay out a plan to acquire these skills in sequence. Here's an example of my tracking spreadsheet that I've used in the past to learn some new excel skills:

It doesn't matter how you organize it, but a tried-and-true lesson of goal setting is carving out time and breaking down your goal into manageable action plans.

Action step:

Take your list from step four, above, and prioritize your roadmap.

6. Ask for Help

If you're struggling with any of the steps above, it's important to ask for help. The biggest problem areas for young people tend to be identifying a circle of competence, and deciding which skills to acquire. This is where help from an outside party can really help.

I've even created Google forms with certain questions and sent them to people I know to quickly collect perspectives from trusted friends, colleagues and mentors. Through this process, I was able to identify my circle of competence. Part of it happens to be asking great questions, summarizing problems and breaking problems down into chunks.

Now, I even use my spare time to consult with people thinking about a career change. Please, feel free to contact me if you need help.

Action step:

Find a mentor that you trust, or even just sit down with a friend and talk-out the problem.

Where Resistance Comes From and How to Overcome It

"The impediment to action advances action. What stands in the way becomes the way."
Marcus Aurelius, "Meditations"

If you feel resistance or find yourself making excuses about why you can't invest in yourself, you're probably on the right track. At a gut level, it means you're thinking enough about doing it, you just don't KNOW for sure.

Most resistance is a form of fear that comes from one of three places:

Money scarcity mindset
Not knowing FOR SURE that it'll be worth the time/money cost
Not knowing which option is best right now

So what helps? How do you overcome resistance and choose yourself?

Following the Steps to Investing in Yourself section will help. Here's how.

Resistance #1: Money scarcity mindset

Having a scarcity mindset around money is crippling. If you view everything as an expense, you'll never spend money on yourself — even when you need it to make a growth leap. Just like there's good debt and bad debt, there's good spend and bad spend.

Mentally differentiating between frivolous expense and true investment is key. One heuristic I use to differentiate them is this: if a spend makes me better at X (more productive) it's an investment.

The truth is, even if you don't have any money right now, there are designs you can put in place to free up money and get what you want. Or, just putting in the time to do it yourself is a form of investment.

Resistance #2: You don't know FOR SURE that the investment will pay off

When you decide something's an investment, two things happen. First, you're expecting a long-term payoff, but you're inherently acknowledging that it might not work out.

Congratulations! Such is life — almost every decision worth making has an uncertain payoff. We have to decide to grow and trust that we'll produce the result we want over the long run.

The hack I use to get around this problem is what I refer to as "sizing" or "options betting". In investing, sizing refers to making your position big enough or small enough so that you get comfortable with a given risk. This always works. Same with investing in yourself. If a $2,000 course is too much money, how can you learn some of the concepts with YouTube and four hours of your time?

What I call "options betting" refers to dealing with uncertain outcomes by creating a few options for how to tackle a problem, thereby increasing the chances that one approach works. Then, betting heavier when you're more certain about the right approach. You can try this for yourself by testing three different ways to learn a skill to see which way you learn better.

Resistance #3: Not knowing which option is best right now

This is the hardest to overcome because these days we can literally learn anything, and a superpower is focusing on what's the best use of our time.

To weed out these infinite choices it's important to understand your circle of competence and find your highest point of leverage. Your circle of competence tells you what you're already knowledgeable about and have some skill in (to build from). Within your circle of competence is your highest point of leverage — the one or two unique talents you have, that when applied, supercharge your effectiveness, creative energy, production, etc.

When you're really clear about these two aspects, you've weeded out 95% of options that might get in the way of your decision, and now you're free to focus on a handful of skills that'll likely have the highest return on time and money for yourself.