What are some concrete steps I can take to become wealthy?
June 16, 2010 9:23 PM   Subscribe

What are some concrete steps I can take to become wealthy? More details inside.

Having just hit 30, my wife and I finally have our house in order, so to speak - very stable jobs in industries with bright futures, a new house back in our home state, and a financial life that is healthy. My question, and then I'll share some background: How can I make our financial situation even healthier to the point where we are out of the middle class mold and (trying not to sound crass) doing very well for ourselves? I don't want to be Scrooge McDuck, diving through coins, but it'd be nice to have some waterfront property and eventually a large nest egg to leave to our future children.

Here's the thing: I've read most of the popular financial literature. Dave Ramsey. David Bach. The horribly-written purple and black book by the guy from Hawaii. I know the drills: Don't buy lattes. Max out the 401k. Put money into a Roth. Don't buy what you can't afford. Work hard. Etc.

The problem is...all of the literature seems to fall into four camps:
1. Philosophical issues, i.e. Think And Grow Rich
2. Uber-practical stuff like Dave Ramsey
3. Overly technical books about stock trading and mutual funds
4. The piles of books that explain how to build wealth so you have a million dollars when you retire.

What none of these books seem to address, and what I haven't been able to find, is the key to becoming wealthy BEFORE you retire. I don't want to retire in 10 years - when I'm 40 - but I'd love to have a million dollars in the bank at that point.

How can one create wealth that one can enjoy before gray hairs start popping out? Obviously, there's no magic bullet, and I'm quite confident no get-rich-quick scheme has ever worked. Is self-employment the way to go? Is owning/renting real estate really all that magical?

I'd love some opinions.
posted by st starseed to Work & Money (29 answers total) 46 users marked this as a favorite
You NEED Get Rich Slowly.
posted by k8t at 9:26 PM on June 16, 2010 [4 favorites]

A professor of mine in college told us that it really isn't at all hard to become a millionaire. He gave us step-by-step instructions on a foolproof method he said he had seen employed successfully by more than one acquaintance. First, get yourself some income, and set aside as much as you can of every paycheck. Work minimum wage if you have to, and eat out of garbage cans if that's the only way you can set money aside. Then, when you have enough saved up, buy slum property.
posted by baf at 9:31 PM on June 16, 2010 [3 favorites]

Build a business that doesn't need you? The idea being that once it's established and can stand on it's own feet, it hires someone to replace you, and from then on, you're not working, but you own the profits.
posted by -harlequin- at 9:37 PM on June 16, 2010

The advice here so far sucks - I hope it is not serious.

Don't be too concerned about leaving your kids a ton of money - that could very well doom them compared to their peers.

You have to decide what, to you, it really means to be "wealthy" or whatever you want to be - is it money in the bank, lifestyle, family, material possessions, educational background, prestige, fame, house, car, what? Then you have to do an honest study of math, risk vs. reward, willingless to live below your means, stamina, entrepreneurial spirit, luck, your degree of risk aversion, practical skills, etc.

One thing that I have been struck by as an "adult" is the number of people who have what I, personally, would consider to be "wealth" or "success" and who would practice many habits that I would never emulate if I had the "wealth" or "success" that they have - like working a ton or being obsessed with some hobby or professional pursuit to the point of isolation. Some of them have stamina or skills or fearlessness of rejection that I never could have or entrepreneurial spirit I could only dream of. A lot of others didn't have those things but just played their cards right with education and jobs, took some smart risks and now have plenty to be what they consider wealthy. Don't listen to others - evaluate for yourself.
posted by iknowizbirfmark at 9:44 PM on June 16, 2010 [3 favorites]

You NEED Get Rich Slowly.

This was going to be my suggestion. Honestly, my life choices have been quite different, so it's not like I'm saying "do as I do and become wealthy." But if I were to want to follow that path, the GRS style of smart choices over time, focused on both raising income and cutting expenses, will produce results.
posted by Forktine at 9:55 PM on June 16, 2010 [1 favorite]

Man oh man would I love to have a long philosophical talk with you. For the most part I have been there and done that. In short, enjoy your life, do good things. I like the advice above about getting rich slowly. Life goes by very, very fast. You won't realize that until it has gone by. I worked very hard with the same goal in mind. I achieved the goal of money, but I used up the best years of my life working on that goal, never stopping to smell the roses along the way. I can only relate my personal experience, which is after you achieve this success it becomes much less important to you. You might look back and learn the happiest years of your life were when you were not rich, so be sure to be aware of your life in the moment, every moment! Be alert and aware of the trade-offs and sacrifices you will make trying to get rich.

Since you have covered your bases by reading books about getting rich, now try reading some about happiness and life. If you aren't happy, being rich is nothing.
posted by nogero at 9:58 PM on June 16, 2010 [14 favorites]

Oh yes, create/start your own company. As a previous poster said, work towards a goal of having it run without you.
posted by nogero at 10:01 PM on June 16, 2010

Exploit other people's talents, resources, claim as your own. Cheat. Steal. That sort of stuff.

Or write one of those books you seem to enjoy, find suckers to buy them.

Remember there's no guarantees in life. You're asking for one. There isn't one.
posted by alex_skazat at 10:05 PM on June 16, 2010 [4 favorites]

Two questions:

1) How do you define "wealthy"?

2) What is your comfort level with risk?

A stable job is income. Income on its own rarely leads to wealth. What leads to wealth is equity. Significant equity, of the kind that might bring wealth, also comes with similar levels of risk. Income and equity are completely different things.

Get in on the ground level of a startup, or start your own, and you might hit paydirt in 10 years. Or you might have years of very hard work and nothing to show for it but experience.
posted by ambrosia at 10:15 PM on June 16, 2010 [1 favorite]

Be careful. I have wealthy siblings and they're miserable because they're never as wealthy as the person next door. This strikes me as a treadmill.
posted by GilloD at 10:19 PM on June 16, 2010 [2 favorites]

nogero's got it.

Wealth has nothing to do with money.
posted by shew at 10:27 PM on June 16, 2010 [2 favorites]

I think you should read a book called Your Money or Your Life.

The book addresses directly the issue of how much is enough. You think you want a million dollars, but how did you arrive at that figure? What will you do with that sum? How rational is your personal definition of wealth?

For example, I can tell you that if I had half a million, I could buy a house in a small town with half that sum and damn near live off the interest from the other half -- whoah, instant retirement! I'd be rich! And yet I bet there are plenty of Mefites with a net worth over 500,000 who don't think they're rich at all and certainly wouldn't dream of retiring on so little.

The book also talks about rebuilding your spending and saving habits such that over time, your income from savings (interest, dividends, what have you) exceeds your expenditure. It makes the point that as you reduce expenditure, not only are you then able to save more, but the level of income you need to achieve gets lower, bringing your putative "retirement" closer.
posted by i_am_joe's_spleen at 10:52 PM on June 16, 2010 [2 favorites]

The people I know who have become wealthy (like, mansion with a gatehouse) have done so by working very long hours in the financial industry (living in NYC) or finding a product to sell that became a very big fad for a short time (through an established import-export relationship). Either of these would require a job change for you.

The people I know who have become very comfortable have done so by having well-paying stable jobs that required highly specialized skills, and living well within their means. Again, this is not a trick or secret method - do your current jobs pay well enough? If so, hang tight.

I also got advice from a former landlady of mine to buy a rental house as an investment property. If you have the money to do this, and are handy enough to do repairs yourself, this could be a good idea depending on your area.
posted by LobsterMitten at 11:09 PM on June 16, 2010

I think you haven't found what you're looking for because there's no recipe for getting rich, just like there's no recipe for getting poor - people come to it from all different directions. Also, people get lucky sometimes.

Don't bet more than you can lose.
Put your savings into wealth generation for you.
Make shrewd, contextual, individual investments at the time. If formulas worked so well, we'd all be millionaires. Best of luck.
posted by smoke at 11:18 PM on June 16, 2010

How do you get wealthy? By saving your income and investing it in new income. Even if that investment is taxable (tax code is your new bible). But first, a reality check: If you're not making close to a million in income minus expenses ten years, you won't be making this goal. So figure out what kind of return you need to make your net worth goal based on current income. If it's low (5 percent), you can find some hopefully low risk bonds to invest in. Anything above 10 percent a year for 10 years is asking for a get rich scheme.

Real estate ownership has been claimed to be the magic ticket in the past, but we saw that magical thinking's conclusion 2 years ago. Past results are not indicative of future profits. Really you shouldn't go into real estate unless you can do home repair yourself and would like a reliable income doing exactly that.

Can't say with certainty, but likely the bigger task for you is to raise your income. This is easier said than done, and will generally require a new job title. Moreover, the promotion that would pay the 50k more a year you need would likely require more education. Pre dotcom, software consultants commanded a significant premium over employees, so it's possible that a change in status can work in your favor. If so, hone your personal sales skills and negotiation.
posted by pwnguin at 11:45 PM on June 16, 2010

I read a chart today which showed that I could have been ready for a very comfortable retirement right now (I'm 42) had I only opted *not* to buy Apple products each time I did in the past 20 years and instead had purchased the same dollar's worth of Apple stock.

(I did buy some, but not early enough, and not on a grand scale...because I wanted to spend that money on the computers and ipods too much!)

There was a brief moment of wistful angst, before I remembered that I am just 10 years away from paying off the mortgage on a home I love and I already live a life that, compared to far too much of the world, is downright luxurious. Remember, my work meant I had the means to buy those Apple products in the first place. If that sort of reality check doesn't do it for you (the part about you already being wealthier than so many...) then I suppose you need to find the next Apple equivalent and start buying their stock, now.

Oh, and then get ready to double your tax burden.
posted by squasha at 2:44 AM on June 17, 2010 [1 favorite]

baf is right. A foolproof way (in the US, at least) to getting wealthier is to buy property in poor neighborhoods, 'rehab' them, and rent to Section 8 tenants. The standards are much lower than for market rate apartments, and the government guarantees you the rent. If the people destroy the house, you just take a loss on your federal income taxes, and collect the insurance and start again. I know of more than a few people who have built up quite a little slumlord empire this way, and they make a killing -- all thanks to the US Government.

I would do this if I weren't lazy, and if I didn't hate dealing with people.
posted by Geckwoistmeinauto at 4:14 AM on June 17, 2010 [3 favorites]

Wealth means different things to different people. There is no surefire way to build up masses of money, otherwise everyone would be doing it.
I'm lucky enough to earn a good living, and we're on track to our goals; but I view it as enabling time with those I love and to do the things I want to do, not a $ amount in a bank account.
Time yields perspective and I guarantee in 10 years time, you'll have a different outlook on this than you do currently.
Far better to work on what makes you happy, do the sensible stuff with your money and agnonise less on keeping up with the Jones.
posted by arcticseal at 6:29 AM on June 17, 2010

And for all the advice that tells you to buy real estate or stocks or a new business start-up, remember all the people who did exactly that over the past 10 years and watched it all collapse with the rest of the economy. There isn't any one surefire way to get rich, and any advice will only work for a certain percentage of the people who take it. There is a large amount of luck and/or being in the right place at the right time involved in creating wealth. We like to think about Ray Croc and the McDonald's empire - but you don't remember all the guys who opened a hamburger stand on the corner 20 years ago and he's still working 60-hour weeks in a greasy apron just getting by.

One other thing I am finding is that having lived below my means all these years and now having a pretty good stockpile to spend, I don't really want to buy gold-plated luxuries and have people wait on me hand and foot. I'm happy with the reduce/reuse/recycle style of life so my money will last for a long time. I feel like I have gained financial security, but not necessarily wealth.
posted by CathyG at 6:43 AM on June 17, 2010

Lots of great advice here, lots of bad advice! Live below your means. Live on one salary and bank the other, buy secondhand, etc. You don't have to live in rags to do it, but you can't have every new toy, either. You must make sacrifices and that's not easy. If it was, then everyone would be able to do it. Then use your savings to start a carefully researched business. Go slowly, educate yourself along the way, read everything you can get your hands on. Build a good team, starting with a CPA and a banker. Tax laws are crazy these days, and heavily skewed towards entrepreneurs and small business owners, you will not believe the advantages. Make cash flow your new religion. Not all real estate investors are in trouble these days, only the ones that didn't understand or totally ignored their cash flow. Whatever business you choose, reinvest your profits, remember you are still living on that one salary. You do need to be handy at home repairs if you are even thinking of the real estate option, and you need a large amount to get started these days, as the banking situation is still dire. And it only looks easy from the outside, there's a lot of misinformation repeated in the answers above. If you are considering this, you can memail me and I'll put you in touch with DH.
posted by raisingsand at 7:23 AM on June 17, 2010 [1 favorite]

If it were that easy, everyone would do it. Question is, how much are you willing to change your life right now? How much risk are you willing to take?

You could hold your nose and go to wall street and work insane hours. Or start a business and work insane hours. Or invest in real estate and work insane hours. Spend some insane hours writing a best seller.

I might add that none of these is fool proof. Wall street is crowded and cut throat. Ninety percent of businesses fail in the first year. Real estate can go down. Most writers can't even get an agent, much less a book deal, and most book deals are pathetic.

Unless you are really really impelled to do any of the above, then you're back to the starting gate. Spend less than you earn. Invest the rest.
posted by IndigoJones at 7:33 AM on June 17, 2010

Well, to have a million dollars in ten years you could try to hit the lottery.

Or you could do what iknowizbirfmark says and figure out what you really want (because money is just a means to get teh times you want) and save up for them with various investment strategies and living on the cheap for years. Waterfront property isn't always a million dollars, my family bought some with very little money. You need to save and bargain hunt for what you want to actually get with the money.

Ben Franklin once said: "Time is the only true currency. It's all we really have to spend." Remember that while you stuff the mattress.
posted by WeekendJen at 7:43 AM on June 17, 2010

Since no one else has said it... don't have kids. You need a lot less money to live wealthy if you don't have to pay for child related costs, and you have more time and energy to devote to earning more money. Or at least put it off as long as you can.
posted by ch1x0r at 7:50 AM on June 17, 2010 [2 favorites]

One way is not to leave the children everything, only a small sum. Pay for their college and let them earn something in life on their own instead of having the feeling always in the back of their head that everything around them is only due to your accomplishments and not theirs.

Here is a good article on it:
Fortune Magazine
posted by InvestorMD at 8:04 AM on June 17, 2010

To add, we've also made several good investment decisions in our lives. However, the best investment I've made was getting rid of cable TV. We used to have TVs in every room with multiple Tivos. I was trying to catch up on all the shows I was missing. In the end, I decided to get rid of it two summers ago. It gave me endless more time which was way more valuable than any sum of money. I'm able to enjoy what I've worked for instead of just watching TV. Basic over-the-air local HD is enough for the occasional viewing. As for shows that seem to be strongly recommended, we use our Netflix to watch the recommend show series on a rainy day.

Bottom line: Time is way more valuable than money. (To me)
posted by InvestorMD at 8:24 AM on June 17, 2010

Here is some real advice if you want to get money. Move to a tax-advantaged jurisdiction and work. Some place like Gurnsey, Jersey, Cayman, etc. Live as frugally as possible for as long as you can. Save as much money as you can. Move to a place that has an extremely low cost of living. Win.
posted by jasondigitized at 4:34 PM on June 17, 2010

This post have some very good general advices.

Basically he boiled down to

How To Get Rich
1) Make a lot of money
2) Don’t spend a lot of money (i.e. live below your mean)
3) Make your money work as hard as you do (i.e. invest)
4) Don’t lose your money (i.e. you need to protect against losses. )
posted by Carius at 7:02 PM on June 17, 2010

I hope you are not looking for detail specific plan to get rich here. If it were that easy, everyone would be rich. The hard part is YOU have to figure out how to create wealth. There won't be any listed steps to get rich. YOU have to decide what's work and what's not.
posted by Carius at 7:07 PM on June 17, 2010 [1 favorite]

Overly technical books about stock trading and mutual funds

Take a chunk of your disposable income (NOT the 401k that you've already got going) and get a really good investment adviser who will be hands-on with you regarding your goals. THEY can do the hard work balancing risk with growth for you.
posted by desuetude at 10:01 AM on June 19, 2010

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