If you want to become rich forever you need to take action today. People don’t just become rich by accident. They get off their butt and take action. If your desire to go to sleep is stronger than your desire to get rich, well then guess what… you won’t never be rich.
But if you have the desire to become wealthy and live a life of financial independence, then here are 6 things you need to do today in order to become rich forever.
#1. Have a plan
Unless you won the lottery or inherited a bunch of cash, no one ever got rich by accident. You need to have a plan for your money if you want to become rich and you need to do it today.
If you don’t have a plan for your money I can assure you other people do. If you are earning an income, you need to be planning on where every penny will go. Otherwise, that money may as well be gone now.
Begin with a budget. It doesn’t have to be some fancy spreadsheet with color graphs and charts. For now write out out on a napkin if you have to. Start by writing down all of your essential monthly expenses. Food, clothes, shelter. That’s pretty much it. Cable is not essential. Nextflix is not essential. A car payment (although you may need to commute to work) is not essential.
Once you are done with the essentials, what is left over? That is your potential monthly savings. Now ask yourself, what are you willing to sacrifice in order to save every penny of what is left after covering your essentials. Are you willing to live without a television? Can you make due without a car? Maybe ride a bike. Maybe you need a car but do you really need to have a $400 a month payment or could you make due with a used car? Clothes are a necessity but do you need $100 sneakers or will the $15 pair in the discount bin work just the same?
If you are not willing to sacrifice anything then maybe you don’t really want to be rich and that is fine. Many people go through life with an empty savings account and are perfectly happy spending their money as soon as they get it. But if what is to actually be rich instead of just appearing to be rich, you will need to plan on making some sacrifices.
#2. Educate yourself
If you are going to be rich forever, you will need to start educating yourself today. As mentioned in the previous section, someone else already has a plan for your money. It is your job to keep them from getting it. You do this by educating yourself on all the ways to protect your earning. And not only protect it but grow it into something that can sustain you through the rest of your life once you decide to stop earning an income.
Right now you are trading hours of your life for dollars in your bank account. Eventually you will run out of hours altogether when you die. Long before that you will run out of hours where you can continue to be a productive worker physically, mentally and emotionally capable of providing the services required to continue to earn your income.
You will need to figure out how to save enough money that it is available to you after that the time comes where you will no longer be working. That will require you not only to understand the best way to save money but the best ways to grow it and get it working for you.
Money never gets old and loses its skills as we do. It can go on working and earning you more money forever. If you invest $1000 today in the stock market, that money can continue to grow and work for you, your children, your grand children, your great great great great grandchildren, and so on until the end of time.
Compound Interest – A Quick Lesson on making your money work for you
Here is your first lesson towards your financial education. Compound Interest is your new King! Compound interest is interest earned on interest. So when you deposit $100 in an account that earns 7% interest per year you earn $7 and at the end of the year you have $107. The next year you don’t earn $7 because you are now earning interest on the new principle of $107 not the original principal of $100. Left untouched, in 10 years, your original $100 grows to $200. For more on compound interest, read this.
Benjamin Franklin ran an interesting experiment to demonstrate the power of compound interest. He died in 1790 and in his will he left the equivalent of $4,400 to two different cities. Boston and Philadelphia. This money was donated with the condition that it be put in interest earning accounts and the cities would have access to a portion of the funds after 100 years and receive the remaining funds after 200 years. In total, after 200 years, the fund had grown to over $6.5 million. From an original investment of $4,400. Benjamin Franklin was a smart man!
#3. Start NOW
The title of the article is 6 things to do today to become rich forever. Not 6 things to do tomorrow or next week or when you get around to it. If you are serious about building wealth then what are you waiting for?
The longer you wait, the harder it becomes to start. Procrastination is a mindset. You are teaching yourself to put things off and for no good reason really. Also, by waiting you are putting off compound interest gains that could be happening right now.
You are probably saying that you can’t afford to start saving now. But what I am saying is you can’t afford not to.Trust me, I have given up hundreds of thousands of dollars in potential retirement income just because I was either too lazy to get started or I made the same BS excuses that are running through your head right now. All it takes is the will to act and a little bit of discipline. Commit to taking action now. Go read a book. Not sure how to start investing. Read some of my articles on investing. Go google around for an hour if you don’t find my information useful. Do something to take the first step towards achieving your financial goals. Then do something else, and so on until you are in full motion steaming towards your ultimate goal of achieving financial independence.
#4. Automate everything
You are alive during a time where all of this is easier then ever before. Your parents, grandparents and great grand parents had to walk to the bank to make transactions. They had dig through the yellow pages to find someone to place trades in the stock market for them. And if they did their own taxes they had to go get the forms at the post office and wait for the check to come in the mail.
All of this is possible in seconds today with the internet. And it is cheaper too. Robinhood offers free stock market trades from your fingertips with their app on your smart phone. You can sign up for an account, fund it and be trading in hours. 30 years ago that would take weeks and you would need to pay a broker to do it all for you.
Today it is possible for you to automate your entire monthly expenditures, savings, depostis, pretty much everything. From directly depositing your income into an account or several different accounts, to setting up auto payments on cable, cell phone, car payments, mortgage, etc. Not only is this time saving, it forces you to stick to your budget.
If you determine a budget that allows you to save a huge chunk of your income, all you need to do is set up all of your regular payments to automate and go on living your life.
*Caveat* You should make sure you have your emergency fund set in place so you do not need to dip into your automated plan in the event of an emergency.
#5. Pay yourself first
The most important and first bill you need to pay every month is your savings account. You need to pay yourself before everyone else gets their greasy mitts on your hard earned money. I keep going back to the statement “If you don’t have a plan for your money, someone else does.” Well if you aren’t paying yourself first then where do you rank? Third? Last?
If you don’t pay yourself first then chances are you are paying yourself last if at all. You are allowing your money to go to everyone except you. And again, this needs to be automated. The first thing that happens when I receive my income every month is a set amount is removed and placed in to my nest egg. (Actually, I have several different accounts that are set up this way.) It happens automatically, before anything else.
I treat it like taxes. Nobody asks you if you want to pay taxes. They don’t make you send them a check. Nobody knocks on your door and asks you for your tax payment (unless of course you don’t pay and they are coming to take you away to the cage). They simply take it before you ever have access to it. The government takes no chances and makes sure it gets paid first before anyone else. They are smart like Benjamin Franklin.
#6. Don’t take risks
Ok so you worked hard to earn your money. Then you worked even harder to put an automated plan in place to assure you are sticking to your budget and paying yourself first. Now its time to make sure you keep what you save.
The 6th and final tip to help you grow your wealth forever is to never take risks with your money.
The lottery is for suckers. Gambling is fun but you are almost guaranteed to lose your money if you play long enough. Don’t take risks with your money if you want to keep it.
Warren Buffet did not become the wealthiest investor on the planet by investing in IPO’s and taking chances on hot new companies that weren’t proven yet. He invested in companies that were easy to understand that had a proven track record of steady performance over time. Basically, he became wealthy the boring way. And that is what I recommend you do.
Most millionaires are not lottery winners, professional poker players or even athletes and entertainers. The majority of millionaires in America today are simple hard working people who simply grew their wealth over time by being frugal spenders, good savers, and smart (albeit boring) investors.
I wrote an article on lowering the risks of stock market investing which you can read here. Hopefully this can help you to understand that you do not need to make risky investments or bad decisions in order to try to get rich. Play it safe and slow and you are guaranteed to make it happen. It just takes time.
If you are interested, here are a few more articles I recommend.
Why Blue Chip Stocks are Essential for your Portfolio
Do I need to hire a financial advisor? A helpful guide to wealth management
And of course I recommend checking out my resources page to see some of the stuff I use to help me in my journey to financial independence.
Earl