What important things does a 20-year-old need to know about money and finance?

Answer by James Altucher:

I'm very excited for you. You're 20 years old. When I was 20 I was busy saving money that I would end up losing. When I was 22 I was thrown out of graduate school and then fired from 3 jobs in a row at higher and higher salaries where I saved nothing.

When I was 24 I moved to NYC and began the first of about ten career changes.

In that time I made a lot of money. Then lost a lot. Then made a lot. Then lost a lot. Then made a lot more.

I did this so many times I made a study of what was working for me on the way up. And what wasn't working on the way down.

So I'm not an expert on anything. I just know what has worked for me to create massive success.

First off, don't bother saving money. You get more money in the bank by making more money. That's rule #1.

Buying coffee on the street instead of in a Starbucks is the poor man's way to get rich. In other words, you will never get rich by scratching out ten cents from your dollar.

People save 10 cents on a coffee and then….overpay $100,000 for a house and then do reconstruction on it.

Or they save 10 cents on a book and then…buy a college degree that they never use for $200,000.

Now your real education can begin:

A) Don't save money. Make more. If you think this is not so easy then when you walk in a certain direction then eventually you will get there.

B) That said, don't spend money on the biggest expenses in life. House and college. Just saving on these two things alone is worth over a million dollars in your bank account.

C) But doesn't renting flush money down the toilet? No, it doesn't. Do the math. You can argue all you want but the math is very clear as long as you are not lying to yourself.

D) Haven't studies shown that college graduates make more money 20 years later?

No, studies have not shown that. They show correlation but not causation and they don't take into account multi-collinearity (it could be that the children of middle class families have higher paying jobs later and, oh by the way, these children also go to college).

E) Don't invest in anything that you can't directly control every aspect of. In other words…yourself. You can't make or save money from a salary.

And salaries have been going down versus inflation for 40 years. So don't count on a salary. You're 20, please take this advice alone if you take any advice at all.

F) If you want to make money you have to learn the following skills. None of these skills are taught in college. I'm not saying college is awful. I'm just saying that the only skills needed to make money will never be learned in college:

– how to sell (both in a presentation and via copywriting)
– how to negotiate (which means win-win, not war)
– creativity (take out a pad, write down a list of ideas, every day)
– leadership (give more to others than you expect back for yourself)
– networking (a corollary of leadership)
– how to live by themes instead of goals (goals will fail you)
– reinvention (which will happen repeatedly throughout a life)
– idea sex (get good at coming up with ideas. Then combine them. Master the intersection)
– the 1% rule (every week try to get better 1% physically, emotionally, mentally)
– "the google rule" – give constantly to the people in your network. The value of your network increase linearly if you get to know more people but EXPONENTIALLY if you and the people you know, get to know and help each other.
   – how to fail so that a failure turns into a beginning
   – simple tools to increase productivity
   – how to master a field. You can't learn this in school with each "field" being regimented into equal 50 minute periods. Mastery begins when formal education ends. Find the topic that sets your heart on fire. Then combust.
   – stopping the noise: news, advice books, fees upon fees in almost every area of life. Create your own noise instead of falling in line with the others.

If you do all this you will gradually make more and more money and help more and more people. At least, I've seen it happen for me and for others.

I hope this doesn't sound arrogant. I've messed up too much by not following the above advice.

Don't plagiarize the lives of your parents, your peers, your teachers, your colleagues, your bosses.

Create your own life.

I wish I were you because if you follow the above, then you will most likely end up doing what you love and getting massively rich and helping many others.

I didn't do that when I was 20. But now, at 46, I'm really grateful I follow the above rules.