This question is sparked by a recent conversation I had. Someone I know asked me why they weren’t rich despite having worked hard all their life and never spending extravagantly. I’m pretty sure it was a rhetorical question but I thought the answer would make a good blog post. In the instance of this particular person it was true that they had worked hard and never spent extravagantly. The reasons the person didn’t get rich are that there job paid just enough to cover modest middle-class expenses. Also the job did not offer a 401k or any type of retirement plan. And what savings there were made were put in investments with poor returns and high expenses. This person never did anything that would have allowed them to get rich.
This made me wonder what does a person need to do to get rich. I believe working hard is part of it but it is clear to me that by itself isn’t enough. To figure out what needs to be done to get rich I thought about the people I know who I consider to be rich or at least well-off. They became rich through three different ways.
- They owned a business.
- They owned real estate investments.
- They worked at a job that paid well above average and put their excess income into investments with a good return.
I probably could have made this just two different ways since the people I’m thinking about that made their money with well-paying jobs also made a substantial part of their wealth through real estate investments. Looking at these three ways to get rich I have to admit that I’m not doing anything to get rich. My blogging is a business but it doesn’t currently have the potential to make me rich. I need to change the potential of my blog and I need to consider the other ways of getting rich as well.
The first and second ways of getting rich can be risky and even the third way has some risk. I’m thinking the reason many people never get rich is because they never take the risk of doing something that can make them rich. What have you done to get rich?
Real estate is definitely helping me secure my future. Even though I don’t have a job right now I can look forward to $5,000 or so a month in rent checks. Maybe something you should have mentioned is creating Passive Recurring Income – you know, income that you receive with little to no effort. That way you could actively pursue other things while the checks keep coming in. My rental houses are usually like that except when I have a vacancy or a tenant has an issue (not that often). Dividend checks are another example.
For me it’s all about pursuing this Passive Recurring Income.
It would be pretty nice to have that much money coming in without a job. A lot of my blogging income could be considered passive recurring income. Most of the money I make from my blogs is from work I’ve done in the past. If I stopped adding new content to my blog I’d still make money for a while although it would eventually dry up. I guess blogging would be semi-passive. It is hard to find true passive income.
Too many people don’t even think about it. They suppose that the only way to get rich is by luck. This is wrong. failure to plan is planning to fail. It’s funny, I’ve seen my friends pour themselves over football or baseball stats, but ask them about their investment return for the past year and they draw a blank stare…
Yep, thinking about it helps, then followed by an action plan…
Making an action plan will be one of my goals for this month.
Although the word rich is open to discussion, you have to do something to become rich. It won’t happen on its own.
I agree.
I guess I’m not doing enough to get “rich” either. My husband owns his own business, but it’s not lucrative by any means. We don’t own property (yet) and I chose a low-paying career. I guess I’ll need to redefine my own ideas of “rich” and plan accordingly. 😉
That sounds like a good plan. 🙂 And who knows, your husband’s business might become lucrative in the future.
Owning a business is the biggest risk — you invest a lot of time, money and opportunity cost into it, and it may or may not pay off. You can win big, or you can lose big.
Real estate is a much safer method, if you’re buying it for the passive income (rental income) rather than for capital appreciation. My strategy is to buy homes IF and only if the mortgage + insurance + water + taxes + repairs/maintenance estimate + vacancy estimate = the rental income. Once you own a few of those houses, the tenants pay the cost of owning the home, and after 30 years — when I’m in my 50’s — I’ll have those homes for “free” and will receive checks every month.
Real estate is something I need to research more. I think it would be difficult for me to get a loan since I’m self-employed but maybe I’m wrong.
I’ve worked my ASS off at my job in the beginning to build a strong foundation. Now, it’s steady eddy.
I’m also working my ass off to make Yakezie.com functionable and grow for all our sakes. I hope people can tell.
Cheers, Sam
I appreciate the work you have done at Yakezie and I’ve definitely benefited from Yakezie.
The words you use to ask that question suggest you may not be up to the task. Very, very few people “got rich”.
One generally doesn’t wake up one day and decide “I’m going to get rich”. Most people who end up with wealth, get there through diligent and deliberate efforts, over a lifetime.
Real Estate is the most common avenue that the ordinary Joe Sixpack can build wealth over time, if you invest in the right properties at the right time, and the easiest way to go bankrupt if you think you’re going to “get rich”.
You’re correct, being “self employed” means you’ll only qualify for Stated-Income loans, and at your income level, well…
There are, of course, exceptions – occasionally, one can find a seller who will carry the whole note, but you’re paying a huge premium for it. Buying a house on lease-option is another way you could obtain a property, lock-in the future price while you’re out getting your “real job” with the two years of paychecks and the savings to boot.
Hint: you “invested” time and money in a JD. Get hired while it still has value, before potential employers simply pass you up.
Your blogging income isn’t passive if you’re spending more than an hour a week on it.
I understand what you mean about “get rich” since it is usually associated with “get rich quick” but the post was about coming up with a plan to get rich and looking at how others became rich I noted how they became rich. It is true none of them just “got rich.”
I will probably hold off on any real estate investments for now since I am adverse to going into debt and think I might be able to find other investments with a similar or better return. There are very low cost investment properties available in my area though that wouldn’t require much of a loan.
I am sitting for the bar this month. My odds of passing are pretty low since it has been so long since I’ve been in school and I’m doing self-study. If I do manage to pass I’ll look into making money with my JD but I don’t think it is of much value to me without passing the bar.
I know my blogging isn’t passive income but it has the potential to be. I’m not sure what the line is for income to be passive since any form of income requires the investment of at least a little time.
No really I haven’t done anything to get rich, all along I have been trying to get good appraisals and raises. In blogging I want to increase visitors, no I didn’t really wroked towards becoming rich
Not everybody needs to work towards being rich. I haven’t actually set a goal of being rich yet. The lifestyle I want to achieve doesn’t require becoming rich although it would make it easier. As long as you are living the life you want you are doing OK.
Like Money Reasons and Krantcents mentioned above…most people think the way to get rich is playing the lottery or inheriting a fortune from some long-lost relative. But the truth is that if you want to get build wealth you have to take action and do things that will move you closer to your goals.
Rich is relative. My siblings, if they knew my income, would consider me rich, yet they would be looking at it as if they had my income and lived their current lives with their current expenses. Similarly I think many of us imagine if we had three to five times our current income, we’d consider ourselves rich. Yet with increased income they, and most of us, would almost certainly raise their level of spending to match it. If only when I was younger, I had recognized lifestyle creep for the demon it is. If I’d stayed in the starter home, I would have paid it off five years ago at the rate I was going and could be banking all that mortgage money, not to mention halving most of my bills and still living in a reasonably decent place. Conversations with the spouse on downsizing now are met with evil glares, she loves the house we have now.
It’s funny, my wife was flicking channels and stopped on millionaire matchmaker a while back. The matchmaker was chiding some multimillionaire for living in a simple three bedroom townhome, basically telling him no woman she could set him up with would want to marry him if he was living in such a shabby place. She didn’t seem to get that maybe part of the reason he was a multimillionaire was because he didn’t spend his personal income on trying to impress others and maybe he didn’t need the kind of woman she’d try to set him up with.
It is definitely relative and I think everyone probably has their own definition. You are also right about the lifestyle creep.
Technically, my husband and I are millionaires. That does make that us rich? We own 40 rental units, which we self manage, so it is definately not passive income. All the rent income is not fun money. We have mortgages, maintenace and repairs, damage,taxes, insurance and rental vacancies to pay for.
We acquired all these properties on a low income ($14 hr).We started at age 40 & 44…and retired at 46 & 50. All we had was equity in our paid off home, and lots of credit available to us.
We live on approx $1000 a month, and throw the rest back into paying off debt. If we want something we buy it, but we usually find a cheap or free way to obtain it.
We travel in Australia in their summer time. We have a cheap campervan we bought and also housesit while we are there.
When in Canada, we live in our 5- unit apt house, along with tenants.
You cannot save your way to being rich., unless you have a very high income.