Why do you manage your money like you're 20?

Reader,

Running IWT for over 16 years, I’ve learned that there’s a limit to how much you can cut, but no limit to how much you can earn.

Yes, even after two recessions.

Yes, even after a global pandemic. 

Let’s assume that as your career progresses (which it will because you’re one of my readers), you'll make more than you did at 21. Many of you will make considerably more. 

There’s this concept in America we love that you should keep spending the same way you did in your early 20s. That’s why we love billionaires who fly economy and we love the fact that Warren Buffett has lived in the same house for 60 years.

But the truth is, as you grow your income, your opportunities and choices change. This is an uncomfortable topic that few want to talk about, but it’s important.

Once you earn more, you get the opportunity to align your behaviors with your values. For example, I love convenience — so I pay for a trainer to create workouts for me. Warren Buffett likes living in his old house … but he also flies private. Take a look at other ways Top Performers invest and spend their money:

• LeBron James wasn't training at his local YMCA. He leverages his earnings to spend millions on his body and is setting new standards for longevity

• Elon Musk isn’t tinkering with positioning and pricing. He’s leveraging his knowledge and capital, spending millions to send freakin’ cars to Mars

• One of my readers, Andy, wrote: “My wife and I donate over $2k a month. Biggest line item in our budget”

There comes a time where your success opens up more doors, more opportunities, and more fun things to add to your life. But you have to change the identity you grew up with to accommodate those possibilities.

It’s shortsighted to think you should keep spending the same as you did in your 20s. You’re not the same. And the puritanical belief that your spending choices should stay the same — even when you’ve clearly grown — makes no sense.

Think about it: If you’ve paid off your debts, maxed out your savings account, you’re earning more than ever … what do you want to do? How can you leverage your gains for an even richer life? If you’re past the basics of personal finance, what do you do? 

This question is, by definition, not for everyone. 

If you’re trying to pay off debt or get a raise, it’s easy to dismiss it. I get that, because I spent my childhood avoiding appetizers at restaurants. Our family lived a simple, middle-class life. I paid my way through college with scholarships. And after I graduated, there was a period of life where I ate at Google with friends (3x/week) because I was making so little money!

But as I made more, saved more, and learned more, I changed my behavior to unlock new doors. That’s why I don’t judge how you want to spend your money. In fact, I encourage you to really consider how you want to use money to live your values.

Frugality is a great approach — for the right situation and time in your life. But there are other values too: abundance, convenience, luxury, charity, leverage, etc. 

Imagine the joy you would feel by being able to send your friend a bottle of champagne for their birthday. Or springing for takeout from a Michelin Star restaurant for an anniversary with your significant other. Or not thinking twice to cut a check for your friend’s charity. 

I know it can be downright inconceivable to spend that much money in the best of times — let alone a global pandemic. But if you’re not in debt and have the basics of your personal finance nailed down, you should shamelessly dial up spending in the areas that make you happy. 

So here’s my challenge to you: Take $500 and spend it on something extravagant that you previously thought would have been unimaginable.

There are some caveats to this: Don’t do this if you’re in debt and don’t have an emergency fund (I recommend at least 12 months). If that’s the case, take your $500 and put it towards nailing the basics. My book has a 6-week program to help you do just that.

For everyone else, get ready to spend lavishly on something you thought would have been crazy. And after you do it, shoot me an email and let me know the results.

P.S. Lots more good stuff planned for next week. I want to pull back the curtain on how high earners manage and spend their money. Keep an eye on your inbox.