How to Get Rich: it’s no secret

Question

How To Get Rich:

(and it’s no secret)

(1) Be Efficient with Your Time & Money

“In short, the way to wealth, if you desire it, is as plain as the way to market. It depends chiefly on two words: industry and frugality. Waste neither time nor money, but make the best use of both. He that gets all he can honestly, and saves all he can, will certainly become rich.”

-Ben Franklin

(2) Delayed Gratification (ie saving)

(3) Invest in a Way that Creates Value

High returns result as your investments increase in value.  Your investments increase in value due to a change in the market or through sweat equity (you working to increase their value). Ex. Adding value to your product or service that customers are willing to pay more for, beautifying or increasing the square footage of your property, etc).

(4) Leverage Other Peoples Money (OPM)

Obtain a loan (debt) or raise equity, both are forms of OPM. Once you’ve built a good reputation and track record for investing, raising equity gets easier.

(5) Investing Over Time (staying/being invested).

(6) Compounding Returns (reinvesting)

is the not so secret way to get rich.

And it’s HOW the rich really get richer!

Example: If you invested just twenty cents each month and generated a 20% return per month and reinvested all proceeds, in 20 months you’d be worth $1,048,576.

Kyle J. · Answer

Saving is important, no doubt.  However, few people can save their way to being rich if they're not EARNING enough money to begin with.  For example, if you make $25k a year, it doesn't matter how much you save, or how you invest what you have left after you pay for your living expenses.  You're not likely to ever become rich because you're not making enough to begin with.

I remember listening to a podcast episode years ago where Brandon seemed to realize that.  He realized it made less sense to spend time figuring out how to save money (like cutting out a $5 cup of Starbucks coffee), and more sense focusing on activities that earned him hundreds, or thousands or tens of thousands of dollars in additional income.  He seems to be doing pretty well now.

I'd argue it's even better yet if you can figure out how to get multiple streams of income coming in, so you're not as dependent on any one single source of income.  (In fact, that's probably why many of us are here in the first place - creating additional streams of income through some form of real estate investing.)

Anyway, just my two cents.

Speaking of cents, I will say that I think the math is slightly off in the example about investing 20 cents for 20 months at 20% return monthly.  I thought that sure is interesting if true.  However, when I tried checking the math, I came up with a grand total of just under $45.00 after the 20 months.  Not bad for a total principal investment of only $4.00, but a far cry from $1,048,576.   Perhaps I did the math wrong though, or we're just doing it differently.

Joe Splitrock · Answer

Nice list and just an observation, it all boils down to time. Time is your greatest resource and your best strength when it comes to multiplying money.

Jai Reddy · Answer

@Jon S.

I get the gist of your message.

I need to find the avenue for a 20% return and that’s where the challenge is.

Jon Q. · Answer

I’d say HABIT (repeated behavior) and TIME are both compounding elements.  Compounding is really the secret to growing wealth.  Also, being efficient and not waisting any of your resources (your time, energy, money).

Joe Splitrock · Answer

Fair point about earning, but your commentary works both ways. There are countless examples of famous people who made over a million dollars a year and ended up filing bankruptcy. So although I agree, you need to make money, it is ultimately just as important how you spend money. Many Americans make enough money that they should be easily able to invest, but after they pay for their life style, all the money is gone. In fact the average person gets a raise and ends up "treating" themselves to a new car or some other luxury. If you are continually spending more, you can never make enough money. It has to be a combination of both. There are millionaires that never made more than $30K a year, so I would even argue you can save your way to massive wealth. The trouble is the average person lacks self discipline. They have to reward themselves.

Joe Splitrock · Answer

Most definitely, how you spend that time on a regular basis. You can watch Netflix, get a college education, research deals, drive UBER, etc. all thin the same block of time. Winners have better habits of how they use their time.

Michael C. · Answer

Let’s see that math on your .20 cent investment model.

You ruined the whole post with such a bad example.

Jon Q. · Answer

Yes, don’t be average.  If you do, you’ll have average results (no wealth and $7k in credit card debt).  To build the life you want, you must take actions most others won’t.  This road can often be lonely, especially starting out, but stay the course and find your people.  There are many who’ve exercised the courage and discipline in order to build an uncommon life.

“Two roads diverged in a wood, and II took the one less traveled by,And that has made all the difference.”

-Robert Frost

Jon Q. · Answer

Yes. With experience, it’s not that difficult in real estate.  I’ve generated 20-40% IRRs for over 20 years now.  The more difficult part is exercising the self discipline to reinvest, developing consistent habits.

There are infinite ways to make money in real estate.  Develop a strategy that helps you accomplish your specific goal amd never quite.  You’ll get there.

Jon Q. · Answer

Please see my revision.  Investing $0.20 @ 20% monthly and reinvesting all proceeds for 7 years will yield $1,075,067.94.

How to Get Rich: it’s no secret

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