5 Ways to Get Rich – What It Takes to Be Rich and Build Wealth


in Investment,Savings

When you think about people who are rich, do you often find yourself thinking that Lady Luck played a major role in how they got to where they are? Doubtless luck played a part at some level, but I’m here to tell you that personal decisions, lifestyles and discipline are far more significant than many of us are comfortable believing.

In my years in public accounting, I’ve had a chance to know self-made millionaires—as well as many of the merely prosperous—and there are patterns common to the breed.

And this is important—if luck were all that determined wealth, few of us could ever hope to get rich, to say nothing of the time that would be wasted even bothering to try. But it really is worth trying, though it might require changes in attitudes, beliefs and habits.

What does it take to be rich?

1. A willingness to defer gratification

One thing you don’t see among the self made rich is a heavy investment in lifestyle. Too often, people seek the trappings of wealth—the cars, the houses, the clothes—rather than a purposeful pursuit of the real thing.

The willingness to defer gratification is a big key. Unless you’re born into money, you’ll never be able to accumulate much of it unless you’re willing to forego many of the pleasures of life long enough to accumulate enough wealth that you can truly afford them without making a dent in you’re financial position.

With the wealthy, success must precede the look of wealth, if that look is ever pursued at all. Many wealthy people live lives that are almost indistinguishable from their less financially secure neighbors. Among the prosperous, there’s virtue in liquidity—and that means less stuff.

Master this concept, and you’re halfway there. It’s how people with even modest incomes accumulate staggering fortunes.

2. Plan on being self-employed

I’ve known a small number of millionaires who worked for others, usually high up the management ladder—but far more work for themselves.

It isn’t just that the self-employed have the opportunity to earn, at least theoretically, unlimited income, but just as important is the control they have over that income. Perhaps more today than in many decades, a person with his own business has greater income reliability than people on salaries. With the explosion of technology, off-shoring of jobs and perpetual cost cutting threatening jobs, having your own business offers a more reliable income stream than many careers.

The ability to keep a steady income rolling in over many years is a major advantage when it comes to accumulating cash. Just as important is being able to grow that income without threat of interruption.

3. Save, save, save

While society wide we’ve come to define prosperity in terms of possessions, addresses, lifestyles and access to credit, the wealthy choose a different path altogether. How much money one saves and accumulates is the goal. The emphasis is always on creating a bigger pile of money, at least over the long term.

One might argue that this type of singular mindset is a form of money obsession, and that may be true. However, the obsession is a temporary one. Once you accumulate a large enough portfolio, life gets easier, stress reduces, and the owner of the wealth is free to live a life that isn’t so money centered.

It’s a sad testimony that most of us will never know that type of independence. But regular savers know it well, and some of them even get rich.

4. Stay out of debt

If accumulating savings is foundational to the self made rich, then its corollary is equally true: stay out of debt.

While many in the middle class have come to see debt as a constant traveling companion—part of the price that must be paid to get to the good life—the wealthy see it for the parasite that it is.

By staying out of debt, you stack the deck in your favor. Debt is self-perpetuating, and while others get on that treadmill early and never get off, the would-be rich avoid ever getting on and spend a lifetime of debt avoidance. As time goes by, the keep more of their cash flow, and even become self-financing.

5. Invest conservatively

Here’s a big surprise: for the most part, the self made rich don’t speculate. Every one that I saw—and I saw their investment patterns—invested their money in high yield, low risk type investments. While the masses eagerly pursue “appreciating assets”, such as growth stocks and suburban/vacation real estate, the rich seek long term cash flows.

Treasury securities, municipal bonds, certificates of deposit, high dividend stocks, and income producing investment property. Most of all, they invest in their businesses; after all, if you’re going to bet on any investment, why not one in yourself?

Another critical point: by investing conservatively, they minimize the impact of wealth destroying market collapses than can take years to overcome.

By investing this way, they guaranty themselves a cash flow no matter what the financial markets are doing at the moment. And once they have enough capital built up, they can always afford to wait out the markets anyway—especially with interest, dividends and rents coming in.

Do you think you can do what the rich do, and abandon much of the “conventional wisdom” about money?

(photo credit: Shutterstock)

Kevin At Out of Your RutThis post is from FiscalGeek staff writer: Kevin Mercadante. I’m very excited to have him contributing to the site. You can find out more about him at his own blog OutOfYourRut.com.

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