How To Become Rich The Simple Way

The easy life over time.

Becoming rich is simple. (1) Spend less than you earn, (2) Invest more than you save, (3) Find ways to earn more, and (4) Do it for as long as possible.

Reference Disclaimer: Not Financial Advice

You Determine What It Means To Be Rich

Consistently doing the little things for big returns.

According to the Merriam-Webster Dictionary, to be “rich” implies having more than enough to gratify normal needs or desires.

Investopedia defines “wealth” as an accumulation of valuable economic resources that can be measured in terms of either real goods or money value.

Robert Kiyosaki’s Rich Dad Personal Finance Team describes the difference between “rich” and “wealthy.” The rich have lots of money but the wealthy don’t worry about money.

The definition of “rich” can vary depending on individual perspectives and cultural contexts. Vox published an article describing how many people have wide definitions for “rich”. While the exact threshold for being considered rich may differ across societies, it typically implies a level of affluence that allows for a comfortable and luxurious lifestyle, beyond the basic necessities.

You should ask yourself what being “rich” or “wealthy” means. That definition will be an important part of how you get there.

My Definition Of Being Rich Means High Spending Power

I agree that there is a difference between being “rich” and “wealthy”. In my eyes, I see “rich” as having enormous spending power. It’s the ability to pretty much purchase anything you want without much hesitation. This then leads to living in wealth. 

Being wealthy goes beyond spending power.

For me, it is defined by how relaxed and peaceful you are while amid abundance and without it. True wealth isn’t concerned about having or not having. It’s this knowing that everything is completely, abundantly, and always taken care of, no matter what the issue might be.

You might call it the ability to produce whatever you need or want, whenever you choose to.

The Formula For Becoming Rich Is Doing The Right Thing For Long Enough

A formula implying success.

Becoming rich isn’t a secret. It’s so remarkably simple that many believe it’s a lie. The formula consists of the following basic steps.

  1. Find the right thing to do that gives you the result or outcome you desire
  2. Do that thing really well
  3. Do that thing for a long enough time

That’s it. 

Here is an example that applies the formula.

You have $300 a month to invest. You’re looking for the highest return with the least amount of risk. After researching where to invest those funds, you do the following.

  1. The investment you choose is an S&P 500 Index Stock, averaging 9% annually
  2. Every month, on a chosen day, $300 is automatically invested in the S&P 500 Index Stock
  3. You do this consistently for 20 years

At the end of 20 years, your investment will have accumulated returns of over $200,000. 

This is just one of many examples. 

On a side note, the “find the right thing to do” formula is also applicable in nearly every area of life. Let’s say in this case you decide to get in a certain physical shape. Your approach may look something like this.

  1. You choose to lift weights, focusing on compound movements such as Dead Lifts, Squats, and Bench Press
  2. You do this consistently 4 days a week, eating and resting in alignment with the workout
  3. This becomes a weekly routine, for 1 year

The result is a fit body with a strong physique. 

Part Of Doing The Right Thing Is Creating The Right Mindset

Proper mindset is the cornerstone of doing anything.

The journey to riches begins with the right mindset. Cultivate a positive attitude towards money and abundance. Believe in your ability to create wealth and be open to learning from successful people who have already achieved financial success. Embrace a growth mindset that thrives on opportunities, challenges, and continuous improvement.

Psychology Today posted an article describing how having an improper mental attitude and perspective interferes with becoming successful.

In another article, Dr. Reid Wilson explains how more battles take place in the mind than in the world around us. When striving to accomplish our goals, be aware that most of the time, our biggest hurdles come from within ourselves, often in the forms of doubt, cynicism, jealousy, and impatience. 

The people you surround yourself with can greatly influence your mindset. It’s helpful to be around those who inspire and motivate you to achieve greater heights. Some suggest finding mentors and building a network of like-minded individuals who share your aspirations. The idea is to collaborate, learn from each other, and leverage the power of a supportive community.

At a minimum, consider watching or listening to people that you admire and encourage you to live the life you would like to have.

Doing The Right Thing Well Means Managing Your Finances Intelligently

Properly managing yourself and the things you do are large part of being successful in anything.

Be as financially literate as possible. 

Investopedia posted an article about understanding finances. You do not have to be an expert, however, even a basic understanding of how to track your expenses, and know where your money is coming from and going, makes a massive difference. 

According to an article posted by Business Insider, over 60% of Americans do not keep track of their money.

Understand Financial Basics

Study finances to be successful in it.

Educate yourself about personal finance and investment strategies. Learn how to budget effectively, manage debt, and make informed decisions about your money. Understanding financial concepts like compound interest, asset allocation, and risk management will empower you to make smarter financial choices.

Forbes published an article detailing the increasing importance of understanding finances.

Have Defined Financial Goals

Knowing where you are going helps to determine how successful you are.

Establishing well-defined financial goals is crucial. Determine what you want to achieve and by when. Create both short-term and long-term goals that are specific, measurable, achievable, realistic, and time-bound. Having a clear vision will help you stay focused and motivated on your journey to wealth.

Forbes published another article that explains how goal setting increases the likelihood of financial success. 

Live Below Your Means

Live below your means.

Spending less than you earn is a key principle of building wealth. Practice frugality by differentiating between needs and wants.

Create a budget that aligns with your financial goals and stick to it. Save diligently and avoid unnecessary debt. The more you save, the more you have to invest.

I should also note, that living below your means does not mean living in poverty or suffering. It’s about understanding what is important vs what is not. Covering necessities like food, water, clothing, and shelter is one thing. Spending money on trinkets and things that will be quickly forgotten is something else entirely. 

That’s not to say that you shouldn’t or can’t purchase things you enjoy. It is, however, about taking the time to think about what you’re interested in purchasing, and considering if that thing brings true value in your life. If it does, then, by all means, go for it. Enjoy and live life. If the product is not something that notably adds to your life, then don’t.

SoFi published an article that details the benefits gained from living below your means that you may find helpful as well.

Avoid High-Interest Debt, And If In Debt, Pay It Off As Fast As You Can

Debt will hold you back.

Credit cards and high-interest loan debts are financial poison. It drags down financial momentum and remains a burden not only on your bank account but also mentally and emotionally. Whenever possible, pay off any debts, especially high-interest ones, as soon as you can.

Doing so will bring a sense of freedom and relief, as the burden of owing money is lifted. It reduces stress and allows you to regain control over your finances. Paying off debts saves money in the long run by avoiding the accumulation of interest charges. This means more resources available for future investments or personal goals. 

I should note, however, your circumstances may be more complex than just deciding to pay off debts. Knowing which debts to focus on, and whether or not it’s advisable to first pay off debts, and then save, depends greatly on your financial details. 

Generally, it’s usually been advised to first pay off high-interest debts.

As always, be sure to consult a licensed financial expert for advice.

Have An Emergency Fund Saved

Save for a day there may expenses you didn't anticipate.

As a good general rule, it’s been often suggested, if not directly advised, to save between 3 to 6 months’ worth of expenses.

This creates an emergency fund should there be unexpected events and economic uncertainties. Life is unpredictable, and unforeseen circumstances such as medical emergencies, job loss, or major home repairs can arise at any moment. Having a substantial savings cushion provides a sense of security and peace of mind.

Furthermore, an emergency fund acts as a buffer during transitional periods, like switching jobs, pursuing further education, or starting a business. Ultimately, saving 3 to 6 months’ worth of expenses is not just a prudent financial strategy but an investment in your future well-being.

Vanguard posts a solid piece explaining even further why having an emergency fund is always a good idea.

Invest What You Don’t Save

Invest what you can for retirement.

This is really what it’s all about. 

The more you can have your money working for you, and for longer, the more likely and faster you’ll achieve a rich outcome. 

Compound interest is the 8th wonder of the world. He who understands it, earns it; he who doesn’t, pays it.

Albert Einstein

Having your money work and earn for you is one of the easiest ways to accumulate financial abundance. As of the date of this post, most banks offer some kind of free investment account. Inquire with your bank or a licensed investment professional about various investment options that offer compound interest returns.

One of the more popular, consistent investments is in ETFs (Exchange Traded Funds). Many (myself included) consider the S&P 500 Index Fund to be one of the best investments. (Not financial advice, but something for you to research).

Investopedia does an outstanding job detailing the S&P 500 Index in this article.

Doing All This Consistently And For Long Enough, You’re Almost Guaranteed To Become Rich

While there is never a guarantee on anything (other than arguably death and taxes), adhering to a consistent plan of being as debt free as possible, maintaining an emergency fund, and investing in something like the S&P 500 Index, is the closest you’ll get.

If you’ve done the research, feel confident about it, the sooner you make the decision to do it, the better. The longer you may wait, the less likely it is to succeed. 

Time can either be your ally or your enemy.

Accumulating riches is not a difficult task. It merely requires a comprehension of what to do, a commitment to doing it, and then doing so for however long it may take. Without a doubt, investing your funds is an excellent, proven way to become financially well off. 

When funds are invested wisely and left untouched over an extended period, they have the opportunity to grow exponentially. The key lies in understanding that investment gains can compound over time, generating returns on top of previous earnings. As time progresses, this compounding effect becomes increasingly powerful, allowing the investment to snowball. 

Moreover, by taking a long-term approach, your investments can weather short-term market volatility, as historical data shows that markets tend to trend upwards over extended periods. This means that temporary downturns are often offset by subsequent recoveries, leading to large overall gains. 

Feng Shui Increases Your Likelihood Of Wealth

Feng Shui can increase your wealth by bettering your environment

Feng Shui, an ancient Chinese practice, is believed to harmonize individuals with their surrounding environment. In essence, as further proven through studies like Environmental Psychology, it can create surroundings conducive for making better financial decisions. 

One fundamental principle of Feng Shui is decluttering, which clears both physical and mental spaces. By removing unnecessary items and organizing your surroundings, you create a more orderly and peaceful environment. 

This decluttering process has a direct impact on your mental state, helping to clear your mind of distractions and stress. A clear mind is more focused and productive, enabling you to make more informed and deliberate financial decisions.

Another core aspect of Feng Shui is the enhancement of your living or working space to create a positive and balanced atmosphere. When your environment is well-arranged and aesthetically pleasing, it significantly improves your mood and overall well-being. 

A better environment leads to better feelings, and this uplift in your emotional state translates into improved thinking and decision-making. You are more likely to approach financial matters with a calm and rational mindset, avoiding impulsive decisions that could jeopardize your wealth.

When you feel stable and secure, you are more likely to take calculated risks and seize opportunities that can lead to increased wealth. Additionally, a well-balanced environment reduces stress and anxiety, allowing you to approach financial challenges with a clear and confident mind.

For more information on Feng Shui and what it can do, check out this previous article I wrote.

Is Starting After 40 Too Late?

A rabbit late for his very important appointment, a metaphor for late investments.

Absolutely not. 

It’s never too late to start investing, and for those over 40 who find themselves without retirement funds, you still have a promising financial future. While it’s true that time plays a role in the power of compounding, you can still achieve large gains over a shorter period.

It’s always important to assess your financial situation first, including income, expenses, and existing assets. Get a clear understanding of your financial goals, risk tolerance, and the timeline you have until retirement. 

Then, look into tax-advantaged accounts, such as IRAs and 401(k)s, as they can also provide a boost to your retirement savings. Contributions to these accounts usually offer some tax benefits worth understanding. 

Generally, many by age 40 are earning a better income than those at age 25. That means that by reducing unnecessary expenses, there is usually more leftover money for investments. Hypothetically, the larger the consistent investment now would make up for the lost years.

Here is an example.

The average 25-year-old doesn’t earn a large income and may have $500 a month to invest. Doing this over 40 years to the age of 65, at 9% compounded interest (average S&P 500 Index Returns), results in over $2,300,000.

This is presuming the 25-year-old doesn’t increase his or her monthly investment amount, but you get the idea.

By comparison, at age 40, investing $2,000 a month consistently over the next 25 years at 9% compounded interest, results in over $2,200,000.

Not bad by any means.

As always, it may be advisable to speak with a licensed financial expert and get their insight based on your specific situation. 

Regardless, if you’re over 40 and haven’t invested before, as you can see, there are still strong opportunities for massive financial growth.

The Truth Is, Anyone Can Become Rich

Becoming rich is a choice.

An article posted on Yahoo Finance describes how anyone can become rich. All it takes are adjusting the way you live to be more conscious of acquiring financial abundance. It’s eerily simple, yet, surprisingly few are willing to follow it.

Frankly, if I were to put it into one sentence, it would be this. 

Solid long-term investments unlock the full potential of compounding that paves the way for impressive financial outcomes. 

In the end, it’s about patience and discipline, which is nothing special.

Until the next time, cheers!

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