The Best Ways to Get Rich…. …and some not so good ways
We tend to assume that if we work hard and save money then one day we will end up wealthy. This is wishful thinking. We are more likely to end up with some modest but useful savings. If you want to accumulate serious wealth then there a number of approaches you can use and some are much more effective than others. The best ways are as follows:
Start your own business and eventually sell it.This is the most effective and proven way to become rich. If you can find a new approach to a customer need and build a profitable business that addresses that need then you have created real value. It could be a cleaning business, a hairdresser’s, a consultancy or an investment bank. It will probably take years of very hard work to build up the enterprise. Most new businesses fail so the risks are high. You need all the skills, dynamism, perseverance and diligence of an entrepreneur. But if you can pull it off the potential rewards are huge. This is how many of the seriously wealthy people did it.
Join a start-up and get stock.If you can accumulate equity positions in one or more start-up companies then there is an opportunity for a serious capital gain if the company thrives and either floats or is sold to a larger enterprise. Only a small minority of start-ups succeed in realising large capital gains so the odds are not good. However, you can use your judgement to see which business idea and which management team are likely to succeed. Early employees in Apple, Google and Microsoft became millionaires on this basis.
Exploit your skill as a self-employed expert.If you can develop a marketable skill and retain your independence then you can reap considerable rewards. This is how sports stars, authors and entertainers become rich. In general the self-employed expert has greater earnings opportunities than one who works for a company. There are risks and you have to have something special. Your success is in your own hands so this is a popular route for people who have developed a skill and want to strike out on their own.
Develop property.Buying, developing and selling property is a well-established way to build a significant capital position. One of the key elements is that by borrowing money you can gain leverage on your investment. Say you borrow $200,000 and put in $50,000 of your own to buy a property for $250,000. Then you develop the property and sell it for $400,000. The property has increased in value by 60% but your $50,000 has now grown fourfold to $200,000. You have to select the right properties in the right areas and develop them wisely. You are at risk from booms and busts in the property market. However, in the long term this remains a proven way to accumulate wealth.
Build a portfolio of stocks and shares.If you can make steady investments in stocks over a long period, choose wisely and reinvest the dividends then you can build a large store of wealth. Of course stocks can go down as well as up and many small investors lose heart when their portfolio plunges. But over the long-term equities are as good an investment as property and much more liquid. Stock market crashes represent great buying opportunities for those with cash and strong nerves.
Inherit wealth.It helps if you were born to successful or wealthy parents but failing that, you could marry fortuitously!There are five primary things that wealthy people simply do differently than the rest of the world. Here are those five, in no particular order.
- They take risks.
The wealthiest people work with routinely “throw spaghetti at the wall to see what sticks.” In other words, they try a lot of different things, knowing that a lot of it will fail.
They take those risks because they know that failure is just part of the process in discovering what will truly work to build more wealth. Furthermore, the rejection of those ideas invigorates the wealthy into finding what will work, a stark contrast to most of the population that simply looks at failure as a road block.
- They invest in themselves.
Wealthy people don’t look at the money spent on personal growth as an expense, but an investment.”
While many individuals conserve every penny equally, the wealthy understand that strategically investing in themselves will produce a far greater return than any stock, real-estate investment or business venture.
Whether it’s purchasing a book, hiring a coach, joining a paid mastermind group or another source of paid self-improvement, the wealthy see this as an investment. Do you?
- They associate with those they want to emulate.
When the human body gets too hot, it produces sweat in an attempt to cool down. When it becomes too cold, it shivers to produce heat. In other words, the human body is constantly adapting to keep its temperature at the same comfortable spot. This automatic leveling is a biological process known as homeostasis and is found in numerous aspects of life.
From human biology to the temperature of the earth to a car’s cruise control to the thermostat in your house, homeostasis is a fact of life that governs nearly every aspect of your existence. And, as the wealthy have discovered, homeostasis can also be a powerful way to build wealth.
“If you want to be rich, hang around rich people.”
Or as financial TV personality Dave Ramsey often says, “if there are four broke people in a room, you’ll be the fifth.”
Wealthy people have discovered that they can grow their wealth simply by associating with those who are even more wealthy. Humans pick up the habits and strategies of those in their immediate surroundings, and the wealthy have learned to use this homeostasis to their advantage.
- They have a dedicated morning ritual.
While most of the world is hitting the snooze button 14 times in a row each morning, the wealthy have already begun increasing their net worth.
“Most of the multi-millionaires I know have a dedicated routine, a ritual, that they do each and every morning,”
This morning ritual could include exercise, affirmations, goal reviews, breakfast or whatever else helps them start their days with a bang. They start strong, accomplishing more before noon than more people accomplish in a week.
In my own life, I’ve found this truth incredibly powerful. Since instituing a morning routine, I’ve quadrupled my income, written and published a bestselling real-estate investing book, lost 10 pounds, bought my dream house and deepened my relationship with my wife. Not bad for just a few minutes each morning of dedicated routine.
- They review their goals consistently.
The rich have clearly defined goals and continually review them to track their progress, make changes and develop strategies for meeting those goals. This process of immediate feedback allows the wealthy to make quick changes to their plans to keep the course in a rapidly-changing world.
While most of the human population gives little to no thought on their futures, the wealthy are reminded daily of where they are headed. Like a family taking a cross-country trip in their minivan, the rich have their road map spread out on the dashboard so they can navigate the fastest, easiest route to their destinations.
These five actions create a positive-feedback loop that will continue to make the rich richer, and there’s no sign of that ceasing. The good news is, however, these five actions are all things that the average American can put into practice today. Will you?
Here’s a few more ideas that are not necessarily bad but are somewhat riskier if your goal is wealth:
- Work in a steady job, cut back expenditures and save in the bank.This is prudent practice and reduces your financial risk but is not an effective method of becoming rich. You should keep your expense within your income but if you want to make serious money then you must significantly boost your income or find ways to multiply your capital. Revisit some of the ideas above.
- Be an inventor.Invent a something that everyone needs and patent your invention. Then licence out your invention and watch the royalties roll in. This is another very difficult route to wealth. Some inventors do get rich this way but securing the patent is arduous and signing a good licensing deal is not easy. However more big companies are looking outside for innovations they can market so it is not impossible.
- We hear about lottery winners and poker stars so this approach can sometimes work but the numbers are so unfavourable that it represents a lousy plan for becoming rich. You are strongly advised to avoid this method and use one of the first six above.
There are more important things in life than accumulating wealth. Who wants to end up rich, unloved, lonely and in poor health? However, if you can enjoy a balanced life and at the same time become rich, why not do so? Plan your route and relish the journey!