Skip to content

5 Financial Mistakes I've Made In The Last 10 Years

2022-02-28 · Long video (solo, talking head or whiteboard) · Ali · recording, 16:50 · watch on YouTube

Topic: Money and investing · mode: List of tips or lessons · tags: His own numbers, Lesson from a book, Aimed at students, Sponsor segment present

Ali lists five money mistakes of his teens (investing late, spending on low-value things, a cheapskate mindset, buying from unreliable sources, misjudging the value of his time) with a rule for each: open an investment account early, ask four questions before buying, spend rather than save as a teenager, pay with buyer protection and never buy what you don't understand, and set a realistic hourly rate.

What is said

The parts of the video and what is said in each (★ — how much it matters to the video).

00:00:00 — Mistake one: being late to the investment game

  • ★★ Ali only started investing in 2015, at 21, although he had been making money from side hustles and a tutoring job since the age of 14. — 00:00:00
  • ★★ Compounding is not the main reason Ali wishes he had started investing earlier: on the small sums he earned as a teenager, about $5 an hour from tutoring, the compounding effect is not that important. — 00:00:29
  • ★★ When Ali started making real money at about 19, as his first successful business took off, it took him two or three years to get comfortable with investing: he feared losing money and did not know what an ISA was or which stockbroker to use. — 00:00:58
  • ★★★ Ali advises teenagers, people in their 20s and anyone not yet investing to put even $10 into an investment account, so the account is open and verified and they know how to invest when they start making real money. — 00:01:27

00:01:56 — Mistake two: spending money on low-value things, and four rules for spending

  • ★★ At about 13 Ali bought a Dell Axim personal digital assistant he had no need for, because he wanted to be a tech and business-organiser type; he calls it a total waste of money. — 00:01:56
  • ★★★ Ali's first spending rule is the law of diminishing returns: the more you have of a particular thing, the less happiness you get from it. — 00:02:26
  • ★★ Asked which iPad to buy, Ali says it depends on what you have and need: going from no iPad to even the budget iPad is a big jump, but upgrading to the iPad Air or iPad Pro brings massive diminishing returns. — 00:02:26 · iPad, iPad Pro
  • ★★ Ali's second spending rule: before an upgrade, ask whether there is anything you would rather spend the money on, such as a life-changing piece of tech or an experience you are far more likely to remember. — 00:03:24
  • ★★ Ali names two life-changing pieces of tech everyone should save up for: a Kindle, which helps you read more books, and AirPods or similar earbuds, which make listening to audiobooks much easier. — 00:03:24 · Kindle, AirPods
  • ★★ Ali's third spending rule: ask whether you really want a thing or only want it because society wants you to, for example whether you would still buy it if you were the only person on earth. — 00:03:53
  • ★★ Ali calls the Apple Watch broadly a flex item he buys to signal something to himself and others, whereas he would buy a laptop even as the only person left on earth, to create things. — 00:03:53 · Apple Watch
  • ★★ Ali thinks buying things to signal status to other people is generally not a very effective use of money, unless you have too much of it. — 00:04:22
  • ★★ Ali's fourth spending rule: ask whether you really want a thing or just like the idea of it; with the Dell Axim he was in love with the idea of having a PDA, the feeling of being an important business person. — 00:04:22
  • ★ Ali says he made some very dubious clothing choices in his teens and probably in his early to mid twenties as well. (hedged) — 00:04:52

00:05:21 — Mistake three: the cheapskate mindset; why teenagers should spend rather than save

  • ★★★ Ali's third money mistake was staying too long in the cheapskate mindset: spending too little money on things that would make you happier or add large amounts of value to your life. — 00:05:21
  • ★★ As a teenager who could probably have earned about $5 an hour as a web designer, Ali once spent about 10 hours hunting for the cheapest web hosting or a free .com domain instead of paying about $7. (hedged) — 00:05:50
  • ★★ Ali says he was out of proportion in spending large amounts of time rather than a little money, and that even adults with real jobs can find it hard to leave the frugal mindset. — 00:06:21
  • ★★ Places on Ali's Part-Time YouTuber Academy cost between $1,500 and $5,000, and hundreds of people sign up every few months when he runs it. — 00:06:21 · Part-Time YouTuber Academy
  • ★★ Ali says students who paid $1,500 to $5,000 for his Part-Time YouTuber Academy often ask whether an app he recommends is free, as if unwilling to spend $3: the balance tips too far towards saving money. — 00:06:50 · Part-Time YouTuber Academy
  • ★★★ Ali strongly thinks saving too much money as a teenager is a bit overrated, because a teenager's earning power is the lowest it will ever be. — 00:06:50
  • ★★ By the law of diminishing returns, Ali says, $20 spent as a teenager brings far more happiness than at any later time, so a teenager choosing between saving $20 and a nice experience with family or friends should generally spend it. — 00:07:20
  • ★★ Ali's two rules for teenagers: spend rather than save if the spending has future returns, as education does, or if you have a safety net such as your parents to fall back on. — 00:07:49

00:08:53 — Investing early in skill development; Skillshare sponsor read

  • ★ Ali thinks he did well to invest early in skill development: learning to code, he bought web design books, and coding, graphic design and web development have really helped him over time. — 00:08:53
  • ★★★ At 18, trying to get a good deal on a MacBook Air, his first Apple product, Ali was scammed out of about $1,000 of his life savings by a seller on Gumtree, the UK equivalent of Craigslist. — 00:10:20 · MacBook

00:10:40 — Mistake four: buying from unreliable sources, the MacBook Air scam

  • ★★ Ali thought he was invincible to scams as a teenager, but says a bunch of studies show teenagers and very old people are the two groups at the highest risk of being scammed. — 00:10:50
  • ★ Since starting his channel Ali has had many messages from teenagers who lost their money to crypto or gambling scams. — 00:11:19
  • ★★★ To avoid being scammed when buying, Ali says to pay with something like PayPal that has buyer's protection; a seller who prefers cash is a red flag, since nothing can be done if he runs off with it. — 00:11:19
  • ★★ Had he taken his time with the transaction, Ali says, he could have inspected the laptop; when buying something there is no need to want to please the seller. — 00:11:48
  • ★★★ Ali's rule: especially with large amounts of money, don't invest in or buy something you don't understand; 20 more minutes of research would have shown him the laptop was a 2008 MacBook Air, not the 2012 model. — 00:12:46 · MacBook
  • ★★ Ali would not advise buying crypto randomly without understanding the philosophy and mechanics behind how it works and having a clear thesis and conviction about how high it will go in the next few years. — 00:13:17

00:13:35 — Mistake five: misjudging the dollar value of his time; relative income and a realistic hourly rate

  • ★★ At about 14 Ali took on two big web design projects paying about $300 each; they took around three years, leaving him an hourly rate far below flipping burgers at McDonald's. — 00:13:55 · McDonald's

  • ★★★ Tim Ferriss (quoted): In The 4-Hour Workweek Tim Ferriss distinguishes absolute income, measured in dollars alone, from relative income, which uses two variables: dollars and time. — 00:14:24 · Tim Ferriss, The 4-Hour Workweek

    “Relative income uses two variables, the dollar and time.”

  • ★ Ali wishes he had read Tim Ferriss's The 4-Hour Workweek much earlier, in 2007 when it first came out. — 00:14:24 · The 4-Hour Workweek, Tim Ferriss

  • ★★ Tim Ferriss (quoted): Ferriss's example: Jane makes $100,000 a year working 80 hours a week, or $25 an hour; John makes $50,000 working 10 hours a week, or $100 an hour, so John is four times richer. (hypothetical) — 00:14:58 · The 4-Hour Workweek
  • ★★ When Ali took on the web design projects he thought only about the absolute income and did not factor in the hundreds of hours of work. — 00:14:58
  • ★★ Naval Ravikant (quoted): Naval Ravikant talks about setting an aspirational hourly rate, apparently $5,000 an hour even when he was young, and not doing anything that makes you less than that. (hedged) — 00:15:27 · Naval Ravikant, money buys back time
  • ★★ Ali finds Naval Ravikant's $5,000 aspirational hourly rate excessive and does not think he would have gained much from following that advice when he was younger. (hedged) — 00:15:27 · Naval Ravikant
  • ★★★ Ali now sets a realistic hourly rate, what an extra hour of tutoring or web design would earn, and stays aware of the dollar value of his time, above all for work that brings no learning or fun. — 00:15:56 · money buys back time

Threads in this video

Mentioned

Central: diminishing returns · MacBook

Also: People: Marques Brownlee · Naval Ravikant · Thomas Frank · Tim Ferriss

Projects: Part-Time YouTuber Academy

Works: The 4-Hour Workweek

Organizations: Craigslist · Gumtree · McDonald's · PayPal · Skillshare

Concepts: Apple ecosystem · compounding · money buys back time

Products: AirPods · Apple Watch · Dell Axim · iPad · iPad Air · iPad Pro · Kindle

Also centred on diminishing returns: The Best iPad - iPad Pro vs iPad Air vs iPad 8th Generation · Which iPad Should You Buy? (Basic, Mini, Air, Pro or Pro 12.9) · The Law of Diminishing Returns 📉

Replies to

← Previous: How to Grow on YouTube - Live Stream with Ali Abdaal · Next → How To Start a YouTube Channel - Beginner’s Guide to YouTube