Content of the material
- 1. Avoid (and Pay Down) Debt
- 5. Treat your money like a rich person
- Rule #2 – You Need To Save Until It Hurts
- 7. Work With an Investment Professional
- Rule #8 – You Need To Take Care Of Yourself First
- 6. Don’t engage in negative self-talk
- Realize That More Money Isnt the Answer
- 7. Live below your means and lay off the credit
- Gauge your risk tolerance
- How Can I Get Rich With No Money?
- 2. Spend Intentionally and Minimize Costs
- How can I be a millionaire in 5 years?
- BOOST YOUR INCOME TODAY
- 3. Take advantage of Uncle Sam’s generosity
- 1. Stay Away From Debt
- Liquidity needs and time horizons
- Day-to-day Balances
- Reserve Liquidity
- Investable assets
- Building Wealth Takes Time
- 7. Invest your money
1. Avoid (and Pay Down) Debt
Debt is not necessarily bad in all instances, but it is something to be avoided most of the time. For instance, student loans can be beneficial if the principal and interest rate are not excessive and they help you pursue a lucrative career.
“Some experts would contend that student loans are bad debt, but I disagree,” said Robert Johnson, chairman and CEO at Economic Index Associates. “I would categorize modest student loan debt as being ‘good debt.’ In my opinion, student loans get a bad rap.”
Again, the emphasis is on how you use them. Student loans can certainly be bad if the numbers don’t work in your favor. “There is no doubt that the system has been abused and that some students have accumulated a mountain of debt and have earned degrees that simply won’t provide the earning power to pay that debt back,” Johnson said.
Make Your Money Work Better for You
Johnson also emphasized that credit card debt is always bad debt and should be prioritized over student loans. Ariel Acuña, founder of independent wealth management firm LTG Capital LLC, recommended putting at least 20% of your paycheck toward debt if you have it.
5. Treat your money like a rich person
Mega-successful people have a financial growth mindset. They focus on spending money on profitable opportunities.
Wealthy people are more open to exploring new ideas because they believe there’s always more money to be generated. Also, they are not easily carried away by instant gratification.
I’d like to make a simple suggestion. Be frugal on purchases that depreciate in value or don’t produce income. Buy assets and avoid or reduce liabilities.
For example, spend frugally on things like cars, home appliances, entertainment items, computers, smartphones, and clothes depreciate quite rapidly.
I’m not going to tell you to avoid these things entirely, but it pays off when you practice conscious spending. The rich wouldn’t stay rich if they always spend mindlessly.
Learn to take full control of your finances. As I mentioned earlier in this post, you need to prepare a budget and pay attention to your spending so you know where your money goes.
Automating your finances can take away the stress of managing your money effectively without leaving anything out. When you receive your paycheck, the money is sent to where it is supposed to.
Your bills will be paid on time and money put away in your savings account without you even lifting a finger. Also, you’ll know if you have some income left over to spend guilt-free.
You can always tweak the automated system to work best for you.
Here a are a few example of how automating your money works:
- Contribute 10% of salary to your 401k and Roth IRA plan.
- Save 5% of salary for things like wedding, vacation, and down payment on a house
- Use 50%-60% of salary to pay regular and miscellaneous bills (rent, utilities, debt, gym, Netflix, etc.)
- Spend 20%-35% of salary on what makes you happy guilt-free
Suggest Read: How to start saving money when you have none
Rule #2 – You Need To Save Until It Hurts
The second rule to getting rich is saving. It’s not enough to just earn money – you have to save it as well. Otherwise you’ll just end up like any number of famous celebrities who’ve gone bankrupt. Income alone just doesn’t cut it. You have to save.
But the real “rule” to get rich here is saving until it hurts. How much is that? Well, if you’re not hurting yet, it’s not enough.
For example, last year, I saved roughly 40% of my after-tax income. Sounds like a lot, doesn’t it? But there are plenty of people out there that are saving more – many over 50% of their income if not more.
The truth is, following Rule #1 makes this rule easier. The more income you have, the easier it is to save more. But even on lower incomes, you can still save. Here are 15 ways to save an additional $500 per month. Boom!
7. Work With an Investment Professional
Here’s a question for you: If you needed to have heart surgery, would you try to operate on yourself? Of course not. That would be dumb! You’d look for the best heart surgeon you could find.
And when it comes to something as important as your retirement future, wouldn’t you want to work with someone who knows what they’re doing? Working with an investment professional is one of the smartest things you can do for your money.
In fact, 68% of millionaires said they worked with a financial advisor to help them reach their net worth.9 You see? Building wealth isn’t a solo sport—and it’s wise to seek guidance from folks who know what they’re doing!
If you don’t have a pro yet, check out our SmartVestor program. It’s easy to use, and it’ll help you find investment pros in your area for free!
Rule #8 – You Need To Take Care Of Yourself First
The eighth rule of building wealth is to take care of yourself first. This isn’t as much of a money rule as a life rule.
When you fly on an airplane, the flight attendant always does their safety speech where they remind you to put your oxygen mask on first before helping someone else? There’s a reason for that – if you’re unconscious, you can’t help anyone else.
When it comes to building wealth, you have to take care of yourself first – even when dealing with family. This can be really hard for some people, especially those that didn’t have much, and now have something that they could share. And others may realize it and ask.
If you want to help others, make sure you’ve put yourself on solid ground first and have followed all the rules. I’ve seen it too many times where generosity leads to financial ruin.
6. Don’t engage in negative self-talk
When it comes to psychology and money, the only thing worse than surrounding yourself with losers is believing you’re a loser.
Do you say things like, “My job is too demanding,” “It’s not my fault,” or “I’m not smart enough.”
Say that enough, and you’ll believe it.
“When you allow negativity to rule your thoughts, you are programming your brain for failure,” Corley wrote. “You’ll have no chance in life at breaking out of your current financial or life circumstances. These negative thoughts will become beliefs that act like computer programs.”
Realize That More Money Isnt the Answer
More money is not going to solve all your problems. Money is a magnifying glass; it will accelerate and bring to light your true spending habits. If you are not capable of properly budgeting a $25,000 salary, bumping your pay up to six figures won't solve the problem. You may be surprised to learn that nearly 1 out of 5 people earning $100,000 a year live from paycheck to paycheck, and they don't understand why it is happening. The problem isn't the size of their checks, it is the spending habits they have built up over the years.
7. Live below your means and lay off the credit
It’s widely known that the wealthiest people in the world are frugal. They don’t spend excessively on designer and luxury items. They use coupons. And, they’re known for living below their means by purchasing modest homes and vehicles.
They’re also known for keeping their debt under control by using credit sparingly. Take a cue from T. Boone Pickens, who only carries around as much cash as he needs for what he intends to buy.
Gauge your risk tolerance
What is your approach to investment risk? Asset allocation can be the most significant factor in the variability of long-term performance—sometimes even more so than security selection or market timing. Your risk tolerance—and your cash needs in the short-, medium- and long-terms—will drive an appropriate mix of assets for your investment portfolio.
How Can I Get Rich With No Money?
Unless you come from a very wealthy family, are expecting to win the lottery, or are on the verge of getting a patent on the next great invention, there's very little chance that you can become rich by doing nothing. You'll need discipline, a plan, and, in some cases, good advice from a registered professional who can help push you in the right direction to reaching your goal of becoming a millionaire.
2. Spend Intentionally and Minimize Costs
If you want to become rich, it’s important to minimize your costs and be more intentional with your spending. This is the second step because it should be one of the first things you do. Spending intentionally and minimizing your costs will require you to keep a budget.
In doing so, you can keep track of exactly how much you spend and where you spend it. Acuña recommends a checklist of how you will spend. “Develop a prioritized checklist for how you’re going to spend your paychecks when you receive them. This includes allocating money to debt reduction, savings, fun, emergencies, etc.”
Your goal should be to minimize costs as much as possible so you can put that money toward building wealth. Jeff Burrow, president and lead advisor at Sierra Ocean, said you should “ravenously find ways to limit your lifestyle costs and save 25% of your income.”
How can I be a millionaire in 5 years?
To become a millionaire in five years, you’ll need to do a few key things:
- Pay off all high interest debt
- Limit your spending
- Start investing as much as you can immediately and consistently
- Boost your earnings, including by developing multiple streams of income
- Create short term financial milestones alongside your longer term one
- Monitor your finances and adjust as needed
If you’re starting from zero, it’s not going to be easy but it’s definitely doable.
For instance, if you invest all your money in broad market index funds that track the S&P 500 (which is actually how I invest my money, as it’s low-cost, reliable and easy to simply set and forget), the average annual return is 8%.Not sure how to start investing? The Simple Path to Wealth is the book I recommend to everyone for this. It literally shows you everything you need to do to build your net worth from zero to seven-figures. In fact, it’s the exact strategy I follow for investing my own money.
To become wealthy in five years by becoming a millionaire through investing in this way, you’d have to invest $157,830.05 per year – yes, don’t forget the five cents!
Clearly, that won’t be possible for everyone. And there’s no reason why you can’t take a few extra years to do the same.
(If you want to see how much your investments will be worth in future, this simple, free compound interest calculator does the job.)
But people have done it – like this person, for example, who followed the exact steps outlined above to reach that point.
BOOST YOUR INCOME TODAY Need to make more money but don’t want to waste your time? See what 7,800+ people said were their top ways to make money – so you too can earn extra cash as fast as possible. Get it free for a limited time! You’ll also join our mailing list to get updates on how to make and save money – unsubscribe at any time at the end of each email.
3. Take advantage of Uncle Sam’s generosity
“The best way I know to become a millionaire is to put the power of compound interest on your side. By giving your money more time to compound and keeping your rate of return as high as possible, you greatly increase your chances of reaching a seven-figure net worth,” Brian Feroldi wrote on The Motley Fool.
“Of course, earning a high return on your nest egg is easier said than done, as many factors to create that return are outside of your control,” Feroldi continued. “However, all investors do have control over two huge factors that can put a serious drag on long-term returns: investment costs and taxes. If you want to become a millionaire, focus on keeping both as low as possible.”
Feroldi went on to write that if you have “a 401(k) or 403(b) through work, then any money you contribute to the account can grow tax-deferred, allowing your money to compound more quickly.” He also suggested opening up a traditional or Roth IRA, because those plans “keep Uncle Sam away from your money, either now or later.”
You should use a broker or brokerage firm “that charges very little per trade — and not to trade too frequently, Feroldi advised. “If you want to become a millionaire, you need all the help you can get. Making sure your investment fees and tax bill are as low as possible will go a long way toward helping you achieve your goal.”
1. Stay Away From Debt
There’s this idea floating around our culture that you have to take big risks to become wealthy. People think you have to take out business loans and open up lines of credit to get ahead, and they justify it by calling it “leverage”—which is just a fancy word for borrowing money and getting into debt.
But here’s the thing: Debt is quicksand to your financial dreams. Every time you buy something on credit or take out a loan, you dig a deeper hole for yourself to climb out of. That money (plus interest) you’re sending to lenders is money you could be putting toward your future!
Folks who went on to become millionaires figured this out a long time ago. They didn’t want their most valuable wealth-building tool (their income) tied up in stupid payments every month.
Here are the cold, hard facts: 9 out of 10 millionaires have never taken out a business loan, and 73% of millionaires have never carried a credit card balance in their entire life.1 They’ll be the first to tell you that one of the main ways to reach the million-dollar mark is to avoid debt like the plague.
The bottom line is this: If you want to become a millionaire, avoid debt at all costs. And if you already have some, get rid of it and pay it off (Baby Step 2) as soon as possible. The only “good debt” is no debt!
Liquidity needs and time horizons
Group cash balances into three types based on your liquidity needs and time horizon.
- 0-9 Months
- Cash typically used for daily needs; may be subject to unforeseen expenses
- Requires preservation of principal
- Same-day liquidity
- 9-18 Months
- Fairly static; same-day access not reached
- Cash set aside for possible investments, large purchases
- 18+ Months
- No short-term forecasted use
Talk to your J.P. Morgan Advisor about planning around your liquidity event and about a longer-term investment plan
© 2021 JPMorgan Chase & Co. All rights reserved.
Building Wealth Takes Time
Some people are reluctant to make a wealth-building plan because they don't want to wait 10 years to be rich. They would rather enjoy their money now. The folly with this type of thinking is that most of us are going to be alive in 10 years. The question is whether or not you will be better off 10 years from now than you are today. Where you are right now is the sum total of the decisions you have made in the past. Why not apply that mindset to decisions you can take now to yourself up for success in the future? Your life reflects how you spend your time and money.
7. Invest your money
A huge factor in how to get rich from nothing is investing your money. Even if you don’t have much money, you can still get started investing to start building wealth.
Similar to creating multiple income streams, you will want to eventually diversify your investments too. This way, you are bringing in income from a variety of sources. Some investment types include:
- Real Estate
The sooner you invest, the quicker you will build your wealth. Some people avoid investing because of their fear of the stock market. Don’t be too intimidated by investing; you can learn everything you need to start investing with Clever Girl Finance’s Book “Learn How Investing Works, Grow Your Money”! You will learn:
- How investing works
- How to create an investing strategy
- What key pitfalls to avoid
- How to leverage investing on a modest salary
- Building a nest egg for your future
- Real success stories from other Clever Girl Investors
You will learn how to become wealthy from this fantastic book by learning how investing works!