What is the absolute best investment you could make in 2024? That's what we're talking about in today's video. I'm going to walk through the numbers and show you why one investment in particular stands out for its potential to make you wealthy. And stick around until the end because I'm going to walk through a case study showing just how valuable this investment can be.

Standard Advice

I have a confession to make. I'm a financial advisor, and so when asked about the best investment, what I'm supposed to say is:

“A diversified portfolio of stocks and bonds. And cut out the $5 lattes, invest that, and in 40 years you'll have a million dollars and no caffeine addiction.”

And don't get me wrong, I love diversified portfolios, dollar cost averaging, and building wealth slowly over time. But is it the best investment you could make? For the average American who's at least a decade from retirement? I'd say no.

What Diversified Portfolios Are Good For

Diversified portfolios are a great way to build a nest egg in order to maintain your standard of living in retirement. It's the best way to do that in my opinion, but it's not going to make you wealthy by itself. In most cases, it's not going to elevate your standard of living.

Many people view the stock market as some kind of lottery with better odds, but if that's what you expect from it, it will for sure leave you disappointed. The reality is if your income doesn't allow you to save a decent portion of your pre-tax income, and I'd aim for at least 15% in most cases, then you either have an income problem or an expense problem, and a diversified portfolio is not going to fix that.

What Is The Best Investment You Could Make?

So let's get to the point. I think the best investment you could make in 2024 is hiring a financial planner to help you. Just kidding. But that can be a great investment as well.

The best investment is an investment that increases your future earnings potential. An investment in yourself, you could say. And before you write this off as some fluffy millennial self-help garbage, we're going to dig into some numbers.

The Return On Investing In Yourself

Now I can show you the difference in earnings between those with a high school diploma versus a bachelor's degree versus an advanced degree, and the numbers are striking. But I don't want you to get stuck in the mindset that an investment in your future earnings potential is limited to a piece of paper from a university.

An investment in yourself could mean heading back to school, but it also encompasses so much more than that. You could earn a certification relevant to your industry, or you could try a boot camp in programming if computers are your thing. You could start a business on the side to potentially increase your income and learn some valuable skills. You could pay for travel in a hotel to attend a conference and network with other people in your industry. It could be as simple as taking an online class and something that could be valuable for the job that you want.

The point is you're looking for ways to level up your skill set in hopes that you can increase your pay either from your current employer or a new employer. And it's probably not going to happen overnight. Investing in your skills is a process that will take time, but focus on the process of gaining new skills and trust that the opportunities will find you.

Now I'm a numbers guy, not a career expert, so you can find plenty of resources to help you figure out what direction to take this, but it's not going to be from me. What I want to show you is how an investment like this can pay off financially.

Investing In Yourself: Case Study

Consider a 35 year old Jim Halpert. Jim has managed to get $50,000 saved. He makes $70,000 a year as a paper salesman, and he plans to work for 25 more years until he's 60.

Now Jim could invest his $50,000 in the stock market, and let's say he earns 7% per year. After 25 years at age 60, his $50,000 turned into $271,372. Not bad.

But what if he invested that $50,000 in various ways to increase his income? Maybe he takes a course on sales, gets a certified paper salesman designation, and hits a few conferences to expand his network. He could leave the paper industry altogether, but he feels the industry is primed to take off.

And with his investment, he increases his income from $70,000 per year to $85,000 per year. And we'll say that he saves half of that pay increase each year, which is $7,500, and he invested in the stock market at the same 7% annual return.

So remember, if he had invested his $50,000 in the stock market, then in 25 years we said it may be worth $270,000-ish. But with the investment in his earnings potential and saving half of his pay increase, after 25 years he has $474,368. That's far more than if he had just invested the $50,000 in the market.

And in fact, his investment pays off within 10 years. Now, obviously I'm making a lot of assumptions here with the pay increase and the market returns, but the point I want to make clear is that it doesn't take a big pay bump or a super long time horizon for an investment in your future earnings potential to pay off.

How To Evaluate An Investment In Yourself

Not every investment in yourself will have a clear payoff and some will likely be a waste of money. But the factors you want to consider are:

• What's the cost?
• What's the likelihood that this leads to an increase in pay?
• If it does increase my pay, what's the magnitude of that increase?
• How long will I actually earn that higher income?

Consider all those factors together and it can help you determine whether a particular investment in yourself is worth making.

Am I Too Old To Invest In Myself?

Of course, an investment like this in your 20s has a much higher likelihood of paying off because you have more time to earn the higher income. But even someone in their 40s or 50s can benefit from this type of thinking.

At some point, it does make sense to turn off the spigot, so to speak, and put more money away in that diversified portfolio. But if you're always viewing this decision through the lens of an investment, then as your income goes up, there's going to be fewer opportunities to invest in an even higher income in the future. And so I think that transition can happen naturally.

Now with every bump in pay, it's super important to be intentional with where that additional income goes. I have a video all about how you can leverage that extra saving power to reach financial independence sooner. So make sure you watch that video next. And if you want some help putting these ideas into practice, schedule a free consultation and we can help.