12 Ways to Get Rich
Last week, I talked about 12 reasons you’re poor. The tone of that post was understandably unhappy. There are a lot of people who are using their money in an unwise fashion. Many of those individuals are having trouble coming up with the money to start investing. Nobody wants to hear they have to make a drastic change.
This week, I’m feeling shiny and happy. You want to become a millionaire real estate investor, right? Maybe you want to become financially independent so you can live life on your own terms. Let’s look at 12 ways you can become rich.
The power of compound interest is so immense that Albert Einstein called it the “8th wonder of the world.” Remember Albert Einstein? His very name is synonymous with intelligence.
Compound interest only gets better with age, meaning the longer it has to work, the more money it can generate for you.
Compound interest takes the money you have and adds the money you make in interest right on top of the pile. Then, it takes that whole pile (original money plus the interest already earned) and adds interest on top of that. Lather, rinse, repeat.
Starting early benefits you more than just a longer term to grow. Getting yourself into the habit of saving, investing, and living below your means at the beginning of your career cements the act, making it effortless. It also removes the “extra” money from your account before you get used to having it around. Cutting your expenses is more difficult than simply not spending what you don’t think you have.
This article from CNBC illustrates the importance of starting young. The highlighted case shows a difference of nearly $100,000 at retirement age when investments start 20 years later. And this particular example uses an extremely conservative 5% return. Average returns from 1926-2011 are more along the lines of 11%.
Most millionaires build their wealth through investing rather than their W-2 job. Starting young will give your investments years to grow, but if you don’t take advantage of compound interest by investing your money, you’re throwing away potentially hundreds of thousands of dollars.
Investing isn’t nearly as difficult as people make it out to be. You can do it yourself or hire it out, no matter what you are investing in.
Real estate investing isn’t hard. It also isn’t easy. Yes, it is work. But it’s work that pays so, so well.
BiggerPockets is primarily about real estate investments, but the best portfolio is a diversified one. Putting all your eggs into one basket is a bad idea. Spread out your risk over multiple types of investments for minimum exposure.
Low-cost index funds are a favorite of Warren Buffett. He recommends investing in the various index funds offered by Vanguard, which has some of the lowest fees out there.
The stock market isn’t the only way to diversify your investments, though. Look into bonds and peer-to-peer lending, too.
Surround Yourself with Like-Minded People
Do you have certain friends who like to spend, spend, spend? Sure you do. We all do. Being around them makes it a whole lot easier to spend money, too. Everybody’s doing it.
On the flip side, being around your frugal friends, who don’t spend every dime they can, makes it easier to keep your money in your pocket.
Go to a local meet up. If you are even remotely interested in real estate investing, you will be super energized by the people you meet there. Talk about real estate, get a handle on what they are doing, and perhaps be inspired to try something different.
People who do not share your goal may try to talk you out of it or belittle your dream. Hearing that it IS possible, being encouraged, listening to how someone else did exactly what you want to do is precisely what you need.
Read and Educate Yourself
Charlie Munger reads. A LOT. Every single day. Who is Charlie Munger? You may not recognize his name, but you’ll know his business partner — Warren Buffett.
Charlie Munger is one of the most successful investors in the history of the world. He is beyond brilliant. He is a billionaire and attributes his success in large part to reading:
“Warren and I do more reading and thinking and less doing than most people in business. We do that because we like that kind of a life. But we’ve turned that quirk into a positive outcome for ourselves. We both insist on a lot of time being available almost every day to just sit and think. That is very uncommon in American business. We read and think.”
There is no shortage of information out there. Read.
You know who else reads a lot? Every. Other. Successful. Investor.
Education isn’t limited to just books, though. I moved to my area three years ago. I didn’t know the market at all, so I asked my agent to send me listings for any property priced under $X. Once I became a real estate agent, I subscribed to the MLS to stay on top of the market.
Very few deals come on, but when one does, I recognize it and can act. Theoretically speaking. There are so few deals on the MLS that I really don’t get to act on them right now. But I still keep an eye out. You never know when something will pop up.
Don’t Be Afraid to Change Course
There are very few people who have carefully planned out their path and then been able to follow it exactly and still reach success. Roadblocks pop up all the time, and detours are inevitable.
Be flexible. Have an open mind. Accepting new ideas will put you ahead of the pack. And if you’re not the lead dog, the view never changes.
Thinking, acting, and doing just like everyone else will yield the same results that everyone else is getting. Be creative in your deal-finding. I wrote last year about two unusual people to add to your real estate team.
Another tip for finding deals? Tell absolutely everyone you know what you do. Not only can this help you find a good deal, this can also help you find deal partners, funding, contractors, etc.
If you are easily deterred, you will not succeed in this business. Deals fall apart all the time, for seemingly silly reasons along with very valid ones. But not every deal that threatens to disintegrate is actually dead. Oftentimes, there are ways to resurrect the deal, be it adjusting price, financing terms, repairs, etc.
Not every property you come across will make a good deal for you. But perhaps it could still be a good fit for someone else. Work on a deal — look at it from every possible angle — to see if it might work for another investor if it doesn’t fit your needs.
Work your relationships. Real estate is a relationship business first and foremost. Always respond to emails and phone calls in a timely manner, even if you cannot give any help or advice. Build a reputation as someone who always replies.
Going hand in hand with being creative is being tenacious. Think outside the box for ways to keep a deal/partnership/relationship alive — as long as it makes good sense.
…But Don’t Be Afraid to Walk Away
Not every property will be a good deal for you. In fact, some properties won’t be a good deal for anyone. The seller might have unrealistic expectations, the market might be in the dumper, the house itself might be so dilapidated there just isn’t any money inside.
After you have looked at a property from every angle and considered the needs of fellow investors, and you still come up short, don’t be afraid to walk away. Not every property works out.
“If you give a man a fish, you feed him for a day. If you teach a man to fish, you feed him for a lifetime.”
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If someone hands you something, it doesn’t mean nearly as much as if you went out and did the work to get it. Do you want to be a millionaire real estate investor? Do the work, put in the hours, make it happen. Earn it.
Stick to Your Values
Earning it will mean very little if you have compromised everything you value in order to get there.
You want to be a millionaire, achieving financial freedom in order to spend time with your children? Then spend time with your children as you are becoming a millionaire.
Use your investing to help people out of bad situations, even if it doesn’t always make you money. The karma points do add up. And who wants to be known as a jerk?
Get Out of Debt
You simply cannot become rich if you are swimming in debt. If you want to be rich, you have to pay off your credit cards, cars, and any other loans you may have. The only exception to this is your mortgage, as long as it’s a low interest rate. Sub 5%.
Here’s a video where I explain 5 ways to knockout your debt.
How have you become rich? What traits do you feel helped you in your path to wealth?
Let’s chat in the comments section below.