You were educated to be one of the people who makes it possible for other people to get rich. You can change that.
Doyou want to be in debt, forced to work a job just for the regular paycheck so you can pay off your new living room set? Is that the freedom you dreamed of when you were younger? No, they told you that if you worked hard, you would one day be a millionaire. But you’re not. Why is that, and more importantly, what can you do about it?
A Caveat
Before we begin, I want to be clear that I’m not here to debate the fairness of American economics. The distribution of wealth is not a topic I can speak to and, more importantly, not a topic you and I can change. What we can change is your attitude toward money, so let’s start there.
Don’t Be “Realistic”
You probably assume you can’t be a millionaire because it’s not realistic for everyone to have a million dollars. But is that true? According to the most recent figures released by the Federal Reserve, the total net worth of all Americans was over $140 trillion. Let me write that out to give you a better idea of how big a number that is, $140,000,000,000,000.
Now divide $140 million by the number of full-time American wage earners (115.3million), and you get $1,228,967 per full-time American worker. So, yes, there is enough money for every hard-working American to be a millionaire. So why aren’t there more millionaires? More importantly, why aren’t you one of them?
Two Main Fallacies about Getting Rich
Let’s start by laying to rest two fallacies; one, you don’t work hard enough, and two, you don’t earn enough money. Ronald Read was a gas station attendant and janitor who amazed his small town when he left about $5 million to his local hospital and library. It turned out Read had amassed nearly $8 million when he died. And he did it while working regular hours as a janitor. If a janitor can become a multimillionaire, it has to be about more than how much money you earn.
Ronald Read did not get rich by earning a lot of money; he got rich by what he did with that money after he made it. This humble janitor taught himself money skills that most Americans never learn, and it worked to Read’s advantage and most people’s downfall.
It’s not about fairness.
Let’s get another fact out of the way, the American system is unfair. It helps the rich get richer, and the poor stay poor. But I’m not talking about the unfairness of economic policy; I’m talking about the unfairness of education in personal finance.
The system is stacked against you. The rich teach their children how to be rich, while the poor and middle class teach them how to remain poor and middle class. If your parents knew how to be millionaires, you would be the son or daughter of a millionaire and probably not reading this advice. So you will need to look outside your family for money mentorship.
The schools don’t teach us how to get rich either. They are stuck on the pre-Ronald Read idea that the only way to become a millionaire is to get a job that pays lots of money. The educational system’s only lesson on becoming wealthy is to study hard and get into a good college to get a good job that pays well.
No one taught you to be wealthy and successful; instead, they trained you to be one of the people that makes it possible for other people to be rich and successful.
School teachers, in general, are not a good source of information on accumulating wealth because they don’t need to be. The average educator’s future is secure with good benefits and excellent retirement plans. So they don’t bother to learn about the intricacies of finance, nor do they want to subject themselves to the risk of the investment world.
Rather than teach you how to be rich, the system teaches you how to be poor. The system educates you to become one of the people that makes it possible for other people to get rich. How is that?
Debt
You live in a world of easy credit. Adds for credit cards are everywhere. Why wait to have what you want now when you can pay for it in just twelve easy installments. The message is all around you, and it seems so normal and rational that you never stop to wonder what you are giving up in the future to get what you think you want right now.
The average American household with debt owes $155,622 as of Jan 11, 2022. It’s impossible to become a millionaire when you owe more than you are worth, but that is the situation most Americans are in, and it is how the rich get richer on the backs of the poor and middle class. As that old adage goes, when you find yourself in a hole, stop digging. If you find yourself caught in debt, the best thing to do is stop making it worse.
Rule One; When you find yourself in a hole, stop digging.
You Buy Things that Aren’t Assets.
So what is it that people are going into debt to purchase? Unfortunately, they are usually all the wrong things. People buy houses, furnishing to fill those houses, cars, boats, clothes, and time-shares in exotic locations. These things may represent success to the people who purchase them, but the rich know something the average consumer does not. All of those things are liabilities and not assets.
The rich don’t spend money on liabilities; they invest their money in assets. The difference is that a liability costs you money over time, while an asset pays you money. A new, bigger house is a liability no matter what your realtor tells you. You pay the mortgage cost plus higher insurance, utilities, taxes, and maintenance. Meanwhile, using that same money to buy a rental property is an investment. Someone else pays all those costs and a little more, and you keep the little more as profit. That makes the rental property an asset.
Other good examples of assets include financial instruments like stocks and bonds, rental property, items you can sell, or a side business. You should be putting a little away every month to buy the assets that will make you a millionaire.
Rule Two; Invest in assets rather than buying liabilities.
Pay Yourself First
To invest in assets, you will need money to buy those assets. The working poor assume this means they need to earn more money. And that is the wrong answer because when they make more, they just spend more. The new, higher-paying job usually comes with costs such as a new wardrobe, a more reliable car, and a longer commute.
The secret to getting rich is to learn to live beneath your means. Not within your mean, but below them. I know that’s not easy. Every two weeks, you find yourself broke and needing that next paycheck. And that is not going to change, but that does not mean the situation is hopeless.
The trick is to pay yourself first. Every payday, money goes into my account, and then a set amount comes right back out and goes into my investments automatically. I never see that money in my bank account, so I’m never tempted to spend it. Better yet, the money that’s left in my account is mine to spend as I see fit, without guilt, because I know I have invested in my future.
Rule Three; Pay yourself first.
Learn step by step how to set up automatic investing to ensure you pay yourself first.
Consistency and patience.
No one becomes a millionaire overnight. Those stories you hear about people who did turn into an overnight success gloss over the long hours and years those people put into building their business or perfecting their craft. They had already paid their dues, so they were ready when the opportunity came.
Like them, you need to keep working on building your fortune a little bit at a time. Because it doesn’t simply add up over time — it compounds. If you invest in assets, then the little bit you put away can grow to more money than what you put in. One hundred dollars a month put into a coffee can adds up to $36,000 after 30 years. It looks like you will need a bigger coffee can.
However, the same $100 per month invested in the stock market (at an average rate of return of 8% computed annually for convenience sake) will add up to $145,920.58 in the same thirty-year period. That is four times the amount of money you put in, more than enough to stuff a mattress. Now that might not be enough to make you a millionaire, but you only invested $100 a month, you cheapskates, so what did you expect.
If you invested a little over $300 per paycheck (every two weeks), you would be a millionaire in the same thirty years. It does not have to be in stock, but it does have to be an investment in an asset and not money squandered on liabilities. The trick isn’t to invest a lot of money at once; the trick is to start now, invest consistently and have patience.
Consistency and patience are unlikely to result in you knowing the joy of overnight success, although it certainly could. It is likely that if you follow this method, you will quietly realize the wealth you deserve.
Rule Four: Be consistent and be patient.
Conclusion
If a janitor can turn multimillionaire, why can’t you? You can become a millionaire; it’s just unlikely that you have been taught how by the people around you. The problem isn’t that you don’t work hard enough or make enough money. The problem is that the system educated you to make other people rich. So you go into debt to purchase liabilities that you think are assets but aren’t.
The solution is to pay yourself first and use that money to acquire assets that will work for you and make more money. Apply this principle consistently over time, and you will know financial success.
