After you read today’s post, please head on over to the Tour de Personal Finance on My Personal Finance Journey and vote for “Time” in Sprint #1. Now on to the post…
A few months ago (on April 1st to be exact) I wrote a tongue in cheek post about how to get rich quickly and not very surprisingly it has been a hit with search traffic. It seems as if many people out there are looking for how to become rich and are ending up at Frugal Rules. I know, it’s not really that surprising as who out there would not like to wake up one day to find out that not only had they won the Powerball, but that it was also raining bags of twenties from the heavens? While I am not surprised one bit that there are many out there seeking how to become rich, it really does show me that many need a paradigm shift – meaning that it takes actual work (generally speaking) to build wealth and that the pursuit of becoming rich is fruitless unless you have the right motivation. If you read the aforementioned post, then you’ll remember how over the top my argument was as to how you can become rich quick. My thoughts today are intended to present the complete opposite of what I wrote then; they are a loose framework for those seeking to not only become rich, but more importantly, build wealth.
Live on Less Than You Make
Our society preaches a gospel of consumerism. Take it from someone who works in the advertising field, it is everywhere and companies play on that aspect in every way they can. This same gospel preaches that unless you give into this consumerism and buy the latest and greatest ‘whatever’ whenever it comes out, you truly will not be happy. The question I’m concerned about is, how can you not only become rich, but build wealth if you give into this mindset of “needing” to spend aimlessly? I am not saying that you need to live off rice and beans while avoiding all consumer goods, but the other extreme will generally get you nowhere in terms of building wealth. There is obviously a balance to have between the two, but ultimately I view it as seeking to be frugal and avoiding debt – all the while keeping your long term goal before you. You will not become rich solely off of embracing frugality, but it can be the beginning of a path to building wealth that will last a lifetime.
Your Mindset is Key
I’ve touched on this briefly, but the pursuit of becoming rich is not one that is aided by chasing down ‘get rich quick’ schemes. We’ve all seen the ads on late night TV proclaiming that you can become richer than a Lannister by flipping real estate or taking some “special” class. The secret those telemarketers don’t want you to know is that their secret to becoming rich is by making money off of you! That is why your mindset is so vital. Just as I have said before in regards to retirement planning, building wealth is a marathon and not a sprint and should be viewed as such, otherwise you’ll be disappointed in the long run.
Becoming Rich Requires Diversity
Many of us have our own hobby horse when it comes to building wealth, whether it be investing in stocks or investing in real estate. There is nothing wrong with either, as long as you do it wisely, and keep a long term view of your investments. While I love investing in the stock market through one of our online brokerage accounts, there has always been part of me that would enjoy investing in real estate as well. I know that it is possible to become rich through solely investing in the stock market or in real estate, but just think about how much more risk you can weather by investing in both. You can also achieve greater diversification, which will ultimately help your desire to build wealth as well as having more sustainability.
You Become Rich Through Hard Work
While my list is not exhaustive, it is intended to communicate one theme – that the desire to become rich is not one that is necessarily easy to achieve. Ultimately, the pursuit to build wealth takes time, effort and commitment. I apologize (well not really) if I burst your bubble of becoming rich quick, but if that is your mindset then a change in thinking is needed. We live in a society that thinks you can get something for nothing. What I learned early in life though, was that there really is no such thing as a free lunch. If you desire to become rich, and have not been born into wealth, then that desire will only be achieved through hard work and a commitment to the future. I know that is counter to what we hear preached to us every day, however, hard work will always take you farther down the path to building wealth than get rich quick schemes ever will.
What tips do you have for someone who has a desire to become rich and build wealth? What’s one area you’d like to invest in, but have not done so yet?
Photo courtesy of: 401(k)2013