I’m putting this in GQ because I often see bodybuilding and martial arts questions here and this strikes me as the exact same thing: wanting to acquire a credible set of skills or body of knowledge.
On a whim I bought RICH DAD’S GUIDE TO BECOMING RICH at the supermarket today. I don’t know what to expect from this, but I feel that there’s a clever and accessible way to manage one’s income, credit, and general resources to be ahead of the game. I also feel there’s a wealth of information out there that is idiotic and money-grubbing silliness.
I have absolutely zero skills in this field. I have no knowledge, no foresight, and not even enough knowledge on the subject for hindsight.
So, realizing that this is somewhat subjective but also realizing that so have been other questions I’ve read here…
…how do I become wealthy-ish? I’m looking for recommended reading, personal tips, authors/experts that have worked for you, etc.
If you are not relying on pure, random luck to get you there, and you have time on your side, then the simple route is to spend less than you earn. Since I don’t know your specific situation, I’ll make this somewhat generalized.
Set aside a specific percentage of your earnings to invest, and then make sure to do it. I use my father as an example. He went from relatively poor beginnings to a millionaire in 35 years, simply by never spending too much. Just because you can afford a Lexus doesn’t mean you should buy one. I can afford better than the 11-year-old Civic I drive, but I keep it, because I love living without a car payment.
Many simple things can be done to improve your savings. I got rid of the cable television. I stopped eating out at restaurants as often. Just simple things.
Personal finances don’t have to be difficult. Figure out what you currently spend that you can eliminate, and save what you can. A couple thousand bucks saved every year over the course of a lifetime can become a large retirement fund.
Regarding debts, get rid of them as fast as possible. If you don’t have the cash on hand, then you probably don’t need that new widescreen television.
If you want to be, um, Anal about it, decide how much money you need, and in what period of time you have to earn it. From there, it is basic math to figure out how much you need to save. Then keep a log of your spending habits and decide what items can be eliminated.
I agree with the poster above me, also contrary to popular belief intelligence often has little to do with how wealthy you are beyond the average. There are plenty of dirt poor intelligent people who don’t have the skills or attributes necessary to “make” it in the real world. I’d say discipline and education are the best two attributes to make a normal person rich. Of course there’s the luck factor and knowing how to exploit that luck for all it’s worth.
Barring that, quite a few of the millionaires and billionaires in this country have family connections or inheritances as well. This country isn’t a complete meritocracy there’s plenty of nepotism going on behind the scenes.
I had this discussion with a very good investment banker a couple of years ago. His basic strategy? Save up around $100k. Then start playing the market.
Saving less than that and earning basic interest is seldom worth it. You need to have a sizable amount to start with and anything less than 50-100K is simply not worth it. Throw in $2k in stocks and watch it grow to $2.2 in a year. Whoppie. You just made $200. But extrapolating it: Use $20k and you just made $2k, re-invest 90% of that, and collect $2980 the next year, use 90% of the profit, re-invest and suddenly, in the third year, you have almost $7000 more.
Thing is, this accumulates. If you start with $200 you’re earning $70 in three years. Big deal. It’s not worth it. If you start with $200k, you’re gonna make $70k in three years, or ~$23k a year. So now we’re cooking. With charcoal. The surplus is big enough for you to re-invest a larger part, every year, until the time when you’re wealthy enough to skim of 0.01% of your earnings and live very comfortably on that money.
So, the old saying is true - It takes money to make money.
Just to add to the first reply… Don’t have kids. I can’t imagine a larger drain on money. Then again, you have to factor in the joy they bring 99% of the time - that’s why I want a minimum of 3.
Always spend less than you earn. Ensure that you can keep doing that till old age. That is the only way to ensure your wealth. It means take advantages that you can make the move to a better paying or more opportunity job and above all don’t live beyond your means. You should never have outstanding Credit Card debt, and any other debt (like mortgage) needs to be very carefully looked at.
Also, you have to ask yourself if it’s worth it having to save on everything in the first half of your life to be rich in the last half?
What I mean is happiness from money isn’t linear. 10 mill won’t make you 10 times as happy as 1 mill. You get over a certain limit and your happiness will stop increasing. You have what you need and can basically do what you want to within certain limitations. The other end is worse though…
Those skills are attributes are exactly the things I’m looking for information on. Right now, I don’t even know what bad information is. For all I know, this RICH DAD’S GUIDE is worth its weight in gold. Is it?
I’ve read Rich dad poor dad which is written by the same guy who wrote the book you’re reading now all it teaches is very very basic common sense. Even then it’s wrong about quite a few things such as real estate being an “expense” plus there’s too many generalities. Not everyone who works hard will make it in life either. The hardest workers i’ve ever seen were dirt poor. There’s just too many factors to take into consideration.
Hey, let’s not forget another easy way to get rich! Buy raw land or distressed properties and turn (develop) them. While it takes resources to buy real estate, in most of the US property values are still appreciating faster than inflation (and the stock market lately).
Save up some money and buy a fixer upper in a decent neighborhood. Perhaps some former rental property. Put some sweat equity into it, sell it, and do it all over again.
My father made a small fortune by “turning” properties over the past 20 years… but of course he lived in the SF Bay Area and was able to take a risk, and borrow money to get started.
Book you should read: “The Millionaires Next Door.”
Instead of theorizing or trying to predict what is the best way to get rich, the authors simply looks at a sample of how the people who did it recently actually did it. It’s basically the result of a survery of several dozen self-made millionaires. To boil it down to a ridiculous level:
Spend less than you earn, and spend as much less than you can afford to as possible. The upper level wage slaves get the fancy suits and Rolexes to show they are ‘successes.’ The Self-made Millionnaires are shopping at Sears and Men’s Warehouses and wearing Timexes.
Your best move is to own a business. Virtually none of the millionaires made it as wage slaves. The ‘business’ can be a profession (like a lawyer or CPA in solitary practice) or manufacturing of anything at all or any kind of service company. What matters is the incentive and willingness to plow most of the income back into the company to grow it in the early years, and, of course, being the one who reaps the result of that growth.
Concentrate on amassing your wealth in formats that are tax-free or at least tax-delayed. As in, it is better to have a real estate investment that is appreciating at the rate of 50 thou a year that have a job that gets you a 50 thou raise or bonus.
There’s more to it, but basically it came down to: penny pinch like mad, invest the saved pennies in improving your own business and in tax-free investments, and wait for time to pass.
With a little luck, you, too can be a rich old geezer who didn’t really have any fun from age 20 to 60.
Although, I’m not anywhere rich (yet ), I still think you can’t go wrong with spending less than you earn, like everyone’s saying. It seems so obvious and simple but look around you and I’m sure you won’t find all that many people living like that.
Also, start investing now. I remember my father telling me that years ago; I didn’t listen to him and now I regret it. Read this article to find out why it’s important to start saving up some money as soon as possible, even if it’s not huge amounts.
Lastly, remember that becoming wealthy is not an ends but a means. The ultimate goal is improving your quality of life. You have to find the ballance between cutting your spendings and living comfortably.
I’m 23. I’m in my last year of university. Whether or not I get a job in my chosen field (a good job) depends on shmoozing. I’m still working on this.
I have an income of $1500 a month and end up with $0 at the end. This disturbs me.
Basically, until I ran away from home I was a total introvert in a highly dysfunctional family. I have absolutely no relationship with or exposure to finances.
I’m trying to remedy this.
That article about investing while you’re young (I’m two years older than the example, that has to be good) was interesting. So was the thing about saving up a large chunk of money to start investing with. I’m going to get that Millionaire book when, ironically, I can save the dough.
One way to ensure that you spend less than you make is to pay yourself first. Call your bank and set up twice-monthly deposits of $125 into a Roth IRA*. If you can’t afford that (that’s $3,000/yr, the max, and 1/6 of what you make – a little steep) scale it down, but still do it. I agree with The Gaspode that it’s nice to invest $100,000 (where the profits are actually useful amounts of money) but it’s even nicer when half of that $100,000 was interest you earned from saving your pennies.
I didn’t worry about saving until I had a job after college. The fact that you’re working through college and breaking even is actually a good thing. See, the rule above only applies when you have zero debt, because the second rule I was taught was put money where it does the most good. If you owe $1000 on a credit card at 14%, and also have $1000 in a bank account earning 3%, you’re obviously not making any money. Eliminate your high-interest debts first, and once you can go month-to-month debt-free, then you can begin investing.
The third thing I was told about investing was the concept of dollar-cost averaging. For long-term gains, purchasing the same dollar amount of an investment (say, bonds or a mutual fund) on a regular schedule ensures that when the price is high, you’re not buying very many shares, and when the price is low, you’re buying more shares. This way, even if the price continues wobbling, you always have more shares purchased below the average price than above it, and stand to make money. Don’t sell. You can sell off your stocks when you’re old.
Last but not least: if anyone offers you free investment advice, ask them what they stand to gain from it. This advice is presented to you because I stand to gain
other opinions on my dad’s investment strategy, which has worked well for me so far,
a small (probably trivial) increase in the market when you finally decide to buy,
and
a small amount of positive reputation for being helpful here on SDMB.
Roth IRAs (“Roth Eye Are Ay”, not “Roth Eye-ra” nor “Roth Ear-a”) are after-tax/tax-free Individual Retirement Accounts. They are intended for long-term investing, and (with a few exceptions) are left untouched until the investor turns 55. Because you pay taxes on the capital that goes in, and contributions do not reduce your taxable income, you do not pay any taxes on the interest or gains… ever. Unless you’ve got an employer who has a matching-funds retirement package, a Roth is your best bet for first-time investing for the long term.
Think of a Roth IRA as a container into which you can put $3,000/yr worth of almost anything. I bought $3,000 worth of a mutual fund that tracks the stock market and is not actively managed (less buying and selling means less overhead). 30 years from now, when I turn 55, that $3,000 should be worth about $24,000 (if I can get it to double every 10 years, which is tough but not impossible - for my early investments, I’m actually mixing in a few higher-risk stocks because I can afford the risk now), tax-free.
I would totally disagree with this. As far as a mortgage is concerned, borrow as much as you can - to the absolute limit. Max that sucker off the chart.
Then buy property. Paying rent is the most ridiculous waste of money ever. If you can get the mortgage to buy a property, even if it’s a shithole - do it. At least this way, in 20 years, you’ve still got each months rent (albeit tied up in your property), PLUS you own the place, and can rent it out, or sell it.
Even if you can’t afford the mortgage replayments, still take it if it’s offered - buy a place and rent it out. Use the rent to pay the mortgage.
Better still, buy a place that needs renovation. Live there while you’re working on it at the weekends and on your holidays. I am still at this - two years after I bought the property. All that’s left for me to do now is to decorate, and according to the Valuers Estimate, at auction it should fetch 110,000 Euros more than the purchase price + the renovation price.
That’s Euro 110,000 in 2 years, while I carried on a fulltime job and a BSc in IT at night. I am not blowing my own trumpet - I mention this to point out that where there is a will there is a way.
Finally, I’d like to mention that my life for the last two years has been fairly tough. I spent my honeymoon stripping plaster from the walls of the bedroom. At one stage we couldn’t afford to re-roof the property, so we had to buy 7 buckets to catch the rain (I live in Ireland - and boy does it rain!!!).
In short - it was a tough time, and you’ve gotta decide how much you want it. Do you want to have a house you can’t have parties / dinners / poker games in ? No-one can visit ? For me - it was okay. For you, you need to decide…
Ok Mr. Scurvey - you are 23 years old and getting out of uni soon. Good you are on the right track. However, one thing about the book (Rich Dads guide) is that that book is not the author’s first…I’d go and read Rich Dad, Poor Dad start with that.
The comment about saving up 100K and then investing is so remote an Idea for someone in your situation I would put that out of your head now. What you need to do is stay persistant…Save like you’ve never saved before and invest wisly now…Invest in good transportation, invest in a starter condo or home that it yours and try not to rent. If you have to rent now…then save for a down payment on a new small home…or condo…get a nice mortgage with 2% down and start building equity. Soon (next 5-8 years) you start letting your assets pay for the things you need and want. This is what the book (Rich Dad Poor Dad) teaches. And it is sound advice.
My wife and I live in such a way where we rarely if ever use cash…we know the value of a credit score, and we use that to our advantage. We pay for everything with credit cards and pay the entire balance off at the end of the month…We also did nt rent for a long time when we first met. We bought a condo together and now some 9 years later we own the condo completely and rent it out for a profit. Do that 10 times over and you really will be the millionaire next door. Incidentally thats another book you might want to read…The Millionaire Next Door.
Good luck and fair thee well with your financial future.
One more thing - How about seeking out the free financial planner’s at your local banking institution…most places they are free and can do wonderful things for young investors.
), I still think you can’t go wrong with spending less than you earn, like everyone’s saying. It seems so obvious and simple but look around you and I’m sure you won’t find all that many people living like that.