Earn Before You Invest (Earn → Learn → Invest)
- Difficulty
- Easy
- Time to result
- ~months to results
- Steps
- 5
- Confidence
- —
Cody Sanchez's sequencing rule for building the first $100,000: most people run the wealth order backwards, going invest → learn → earn, when the highest-ROI move is always earn → learn → invest. The mechanism is simple: returns on invested capital are capped (roughly 7-10% a year, which mostly exists to outrun inflation), while returns on your own earning power are uncapped. A 5-20% annual salary negotiation or a skill that raises your rate compounds faster than any index fund at the starting-capital stage. Investing is reframed as inflation defence, not a wealth-creation engine, unless you are actively involved in the investment itself. Only once earning is optimised does learning how to deploy money, and then deploying it, become the right use of attention.
Origin
Extracted from Deep Dive with Ali Abdaal
How to run it
- 1
Optimise earning first
Before allocating a single pound to markets, ask what the easiest, highest-ROI action available to you is. It is almost never putting a dollar into the stock market — it is raising the income you already control.
Pro tip Rank options by ROI per hour of effort, not by how exciting they sound.
- 2
Negotiate income upward on a schedule
Treat a 5-20% salary increase as a recurring annual or biannual event rather than a rare favour. Compounded across several years this dwarfs early portfolio returns on a small balance.
Pro tip Book the negotiation into the calendar so it happens whether or not you feel ready.
- 3
Invest in your own ability to earn
Direct surplus into your own business or your own skills — the assets whose ROI is uncapped — before directing it into assets whose ceiling is the market average.
Watch out This only holds while your earning base is small; it is a sequencing rule, not a licence to never diversify.
- 4
Learn how money is deployed
With income rising, build the knowledge to invest intelligently. Money makes money more easily once you have it, but only if you understand the vehicle you are putting it into.
Pro tip Start from your actual goal (financial independence, an extra £1,000 a month) and work backwards to the vehicle.
- 5
Invest to beat inflation, not to get rich
Set the expectation at 7-10% a year, consistently. That is the number that stops your money being eaten by inflation. Anything beyond it requires active involvement in the investment, which is a different game.
Watch out Expecting a passive index position to make you rich sets a 30-year timeline you probably did not sign up for.
In the wild
Ali describes friends asking what they should invest their money in. The easy answer is the S&P 500, but he pushes back to the goal first: what are you actually trying to achieve? Usually it turns out they want financial independence, or an extra £1,000 a month for holidays. Running the maths on index returns alone, they get there roughly 30 years from now. The conversation then shifts to the real lever — raising their own earning capacity through their business or their skills, which returns far more than 7% on the top 500 US companies.
→ The question moves from 'which asset?' to 'how do I earn more?', which is the higher-ROI answer at that stage.
Common mistakes
Running the order backwards
Going invest → learn → earn means you are deploying small amounts of capital you do not understand, hoping a trade or a token does the work that income should be doing. Cody calls this completely wrong.
Treating index funds as a wealth engine
Investing exists so inflation does not eat your money. Passive market returns beat inflation; they do not make you rich unless you are actively involved in the investment.
Copying visible investing winners
People see others make a lot of money investing and forget it is a long game played with capital they already earned elsewhere.
From the transcript
“your first $100,000 comes faster if you earn before you invest”
“we have a strategy called learn um which is basically we want you to focus first on earning money before you do anything”
“the ROI of you is infinite the ROI of an investment is capped”
From the episode
5 Skills to Level Up Your Life - Season 6 Roundup
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