How to get rich? “Being the richest man in the cemetery doesn’t matter to me!” (Steve Jobs) In an interview, Steve Jobs said his goals in life were never to make a lot of money; instead he wanted to leave the world a better place. I know money is important, but at what price? How much money is enough? Does money really make you happy? Everyone wants it, but few know to get it!
How much is rich? Rich is a great deal of money or assets; wealthy. When I ask my students their definition they seem to either identify possessions or a certain amount of money. A net worth of a million dollars or more would put you in the top 5% of Americans according to the Federal Reserve. A million dollar net worth (assets such as residence and retirement accounts minus your liabilities) is probably not enough to really make you feel rich, but it beats having less.
Over time, owning a home is a better financial choice than renting. After all, you have to live somewhere! Assets such as real estate are not easily disposable unlike stocks and bonds. It is one of the reasons; I do not include real estate in my net worth. Is real estate a great investment? A personal residence is not an investment! If you purchased your home at the right time, it does increase over time. Buying and selling any real estate is much more expensive thanks to a 6% commission and other costs.
How much money does it take to be rich? It is different for everyone, but a net worth of a million dollars or more is the minimum. Wealth is not luck, but hard work! I suppose you could buy a lottery ticket and hope that you can win in spite of the ridiculous odds. Instead, you should use those funds and others to save and invest in assets that increase in value. Instead, most people keep the economy going with purchases of things that decreases in value such as cars, clothes, dinners, etc.
You can fill your life with huge car payments for Porsches, BMWs or Mercedes and watch the value of your asset decrease. Many will rent these status symbols by leasing and pay thousands of dollars just to have it temporarily. Either way, it will not help you become wealthy. In a smaller way, you can waste small amounts of money on lunches, cable TV, and many other expenses that add up to thousands per month. I am not including student debt because it helps you increase your earnings over time.
Becoming wealthy takes work! You have to delay gratification by makes sensible choices. Little things count such as buying a fancy coffee every day or going out for lunch are just two choices that will keep you from wealth. Do you think about your expenses or just spend the money you have. If you spend what you have, it leads to debt versus wealth. The road to wealth is not easy, but you can achieve it if you work at it.
Five Steps to Wealth
- You need a plan – What do you want to accomplish by twenty-five (25), thirty (30) or thirty-five (35) years old? You need a plan, goals, and a budget! Any goal worth making needs to be written down, monitored and effort. You need to keep your goals in front of you by monitoring your progress daily/weekly/monthly in order to achieve it.
- Save – Everyone talks about saving and investing your money, but it requires sacrificing something today for the future. It is easier to save when you earn a lot of money, but everyone can save! Save at least ten (10) percent of your earnings and invest it routinely and regularly. Over time, you will have something to buy a home and retirement. Keep a record of your spending and you can do something about it.
- Invest in you! – It starts very early! Your first job is being a good student and you should find out what you like and are good at. Good grades will help you get into college or post secondary training that leads to a good career with good earnings. If you do not invest in yourself, you left with few choices and low pay. Figure out what you like to do and skills and you will earn a lot of money. Your starting wage affects a lifetime of earnings!
- Investing – Investing in assets that increase in value is a no brainer! You can buy a home, stocks, investment property, a business etc. It all starts with savings and what you decide to do with it. You can save to take a trip or holiday presents. When financial experts say to pay yourself first, they were not talking about gifts and vacations. You still need to save and invest in assets that increase in value over time.
- Choices – We make choices all the time! What will you have for dinner or what you will do tomorrow? How you spend your money will help or hinder you from becoming wealthy. I keep my expenses low and save thirty-five (35) percent of my income. I approach my spending decisions with a value perspective. Am I getting enough value from my choice to continue or should I change?
I share my steps to wealth because it helped me achieve financial independence very early (38 years old). Do you have a plan? How is it working for you? A plan is only as good as your execution. You need to always monitor your progress to know how you are doing. It is not easy nor is it impossible. All it takes is consistent effort and sticking with your plan. How will you become rich?
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Clarisse @ Make Money Your Way says
I totally agree with “Invest in yourself”, if you don’t study well and don’t have good grades, then basically you will have a hard time to look for a good paying job. And by having a plan and being consistent in achieving it will lead us to have a good financial aspect.
The trick is “good” grades. You do not need all A’s, however you should have additional activities including sports, clubs, organizations in and ou t of school. My students who are accepted to the best universities all that those elements. Employers are looking for the same things, the ability to many things well!
Money Beagle says
Setting points along the way as part of your plan is key, that way you can track things as you go. If you set a plan that you’ll get rich in 10 years, but don’t put steps in there for where you need to be after year 1, year 2, and so on, you might toodle along thinking that you’re just fine, until it’s year 5, and you realize that you’re nowhere where you should be. Setting points along the way by which to track against will alert you much earlier in the process that you need to refine your plan.
I call them milestones! They are intermediate (short(er) term) goals to measure my progress. If I did not have those steps, I would probably meander. My10 year plan for financial freedom worked so well, I achieved my goal in 8 years.
I actually don’t want to be rich. I just want my financial independence! You know the saying, “Mo money, mo problems!”
It takes money to achieve financial independence! Everyone defines rich differently anyway.
Peter H. says
I’m with you on this one Holly. I don’t think people really understand what being “Rich” is really about. It’s not just mo’ money… there is moooooo’ problems.
I disagree, more money does not necessarily means more problems. As a former CFO, I was used to dealing with large numbers so that did not intimidate me. I would make decisions with larger numbers anyway.
One of the most important components to me is time. Time really allows that compounding effect to take place on the savings. I’m hoping to achieve financial independence by age 45, we’re on track for that.
Definitely, compounding using time to your advantage. There are other elements such as income and savings rate too.
Stefanie @ The Broke and Beautiful Life says
Getting rich just like achieving any other goal is about establishing habits that are conducive to moving towards the desired result. Just like cake doesn’t make you skinny, spending money on non investments doesn’t make you rich.
Good points! Accumulating wealth just takes making good choices most of the time similar to staying fit!
Mr. Utopia @ Personal Finance Utopia says
These are good steps. I think “invest in you” is the most important. If you invest in yourself wisely through education and real life learning experiences, the other items should come more naturally.
I agree! It is one of the things I tell my students.
You can be rich in so many areas of life and not have any money. If someone has a bunch of money buy doesn’t really enjoy their life, it’s difficult for me to say that they are rich.
My goal is to achieve financial independence by 40, or sooner if possible. I’m still young and don’t have many expenses (mostly student loans at the moment) so it has been easy for me to build up some wealth early on in life.
It is never easy, but the most determined always win! Good luck and keep at it.