How to Become Rich the Right Way
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Our society is filled with people who want to get rich quickly. The desire to become rich isn’t a bad one, heck, this is a personal finance site! While I’d love to wake up to it raining bags of $20 bills or win the lottery, it won’t happen and I don’t play the lottery. All joking aside, it’s not the desire to become rich that’s wrong, it’s the way you go about it that makes the difference.
You might have heard there is a secret to becoming rich. There really isn’t. The secret is there is no secret to becoming rich. Rather than a secret, there is a paradigm shift needed if you want to become rich. That paradigm shift requires a long-term view of many things and determining what’s of value to you. This is how you build wealth, which really should be the ultimate goal.
You can become rich, though the goal should be to grow wealth. A wealth that allows you to be financially free to do the things you want that’s not burdened by debt or poor choices. If this is the kind of wealth you want, there are many ways to accomplish it – if you put in the time and effort.
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 frugal living and an overall avoidance of debt. This should be done in concert with your overall long-term goals.
Let me state this – frugality will not make you rich. You can only cut back so much. There needs to be a point where you find ways to multiply your money as well. The combined force of savings and making/growing your money will help catapult your wealth building efforts.
Your Mindset is Key
I’ve touched on this briefly, but you can’t become rich by pursuing some sort of scheme. 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. While that would be nice, it simply doesn’t work that way. If it did, everyone would do it and we’d all be rich.
The secret those telemarketers don’t want you to know is that their secret to becoming rich is by making money off of you! They sell you a pipe dream, only to profit off your hard earned money. That is why your mindset is so vital.
This mindset is one that looks at the big picture, not looking for fly by night kind of ways to become rich. Just as retirement planning requires a long-term view and commitment so does building wealth. It’s all in the mindset.
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, I would also like to invest in real estate. I don’t have the time to invest in real estate currently, though I plan to do so in the future. The reason is simple – you need diversity to build wealth. Not only does diversity help you weather a downturn in one sector, but it also creates multiple streams of income. Both are vital to growing wealth and becoming rich.
Don’t stop at investing in the stock market or real estate. Look for other options to create additional streams of income. One possible option is through peer-to-peer lending. As a P2P investor you get to not only help those in need – you also get to make money.
The two leading P2P sites, Lending Club and Prosper tout the ability to earn between 5-9% back on your investment. Again, this is meant to help create diversity of investment options and income streams. Regardless of which options you pursue, make sure to do your homework prior to investing.
Related: My favorite tool to watch my net worth is Personal Capital. Personal Capital allows you to track your expenses, monitor your investment accounts and much more. In short, it’s like Mint with investing thrown in. The best part, Personal Capital is free to use!
You Become Rich Through Hard Work
My list of how to become rich is not exhaustive. In fact, the point is to get you to think of the different ways you can build wealth. It’s not easy. It doesn’t happen overnight, nor should it. 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 you need to adjust your mindset.
We live in a society that thinks you can get something for nothing. That’s simply not possible. There is no such thing as a free lunch. If you desire to become rich, and have not been born into wealth, 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?
Additional resource: If you’re looking for somewhere to invest with little money and begin to grow your wealth, you can open a Wealthsimple account with no minimum balance requirement. Wealthsimple offers a great way to get started since they focus on low-cost ETFs as well as allowing for instant diversification, not to mention promotions when you open a new account with them.
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