How to Get Rich: 10 Tips for Increasing Your Wealth
By: Dannie Phan | September 1st, 2020
Building wealth is by no means easy: it takes hard work and lots of perseverance. But it’s not impossible or out of reach, either. While there is no secret behind how to get rich from nothing, there are things you can do to accumulate wealth over your lifetime to achieve financial freedom.
However, there are a lot more “get rich quick” scams you can fall for if you’re not careful. Spoiler alert: you won’t become a millionaire overnight by investing all your life savings in the stock market based only on hunches. You’re more likely to lose everything and get even further away from your goal.
Today, we’re saving you from these traps by giving you our best tips for building a fortune safely and effectively.
What Does Being Rich Mean to You?
Ask ten people what being rich means to them and you’ll get ten different answers. For some, it means swimming in a pool filled with a lot of money and having a net worth of a million dollars. For others, it simply means having enough money in their bank account to effortlessly withstand unpredictable blows (like the COVID-19 pandemic or an illness).
What does being rich mean to you? Do you want to live a comfortable high-middle-class life? Or would you rather build a massive empire? Once you have the answer to this question, you’re ready to move on to the first step on your financial freedom journey.
Top Tips on How to Become Rich in 10 “Easy” Steps
Let’s talk about the elephant in the room—the word “easy.” Don’t be fooled. There’s no simple and quick way of building wealth. If there was, we’d all be filthy rich. Chasing “get rich quick” or “how to become a millionaire” advice from someone on Google without being critical of it is no short-cut. After all, there are dozens of online scams (like multi-level marketing, pyramid schemes, and risky stock funds) unsuspecting people fall into every day—they’re the snake oil of our day and age.
When we tell you there are easy steps to becoming rich, we mean they’re doable. Everyone’s financial life is different, but if you put enough time and work into it, you can do it.
1) Set Financial Goals
The first step should be to create a list of your financial goals. As we’ve mentioned, there are many answers to what being rich really means. So you need to decide what you want to achieve. Only after you make this list will you be able to start working toward those goals.
You should also set your priorities. In other words, what things are you willing to let go of and what things do you want to keep in your life? By freeing up meaningless expenses, you’ll free up extra money, but we’re getting ahead of ourselves.
2) Change Your Approach to Money
You must also reshape your attitude toward money. Depending on how you grew up, you’ll have a different outlook on what life with money can offer.
If you had little to no money growing up, you might see cash as essential to your happiness. But if you grew up with plenty, money may carry less meaning and emotions. Both points of view are perfectly valid and understandable, you just have to make sure they’re working for you.
3) Tackle Debt Right Away
This is one of the hardest steps for most Americans to tackle, but an important one nonetheless. You can’t build wealth if you have crippling debt weighing you down. If you’re paying high interest rates on credit card debt or student loans, it will be that much harder to get ahead in your financial freedom journey.
It sounds counterproductive, doesn’t it? You have to be debt-free (or carrying little debt) to make money, but you can only tackle debt when you have money in your bank account. That’s why it’s so hard to get out of this cycle.
You could try refinancing or renegotiating debt with your lender. There are companies like Payoff that help consolidate your debt. You could also shift your budget to tackle the most pressing debt obligations first, to avoid the highest interest rate fees at the end of the year.
4) Break the Overconsumption Mindset
Overconsumption isn’t healthy, and you probably don’t need us to tell you that. Every year, millions of Americans get further into debt because of this mindset that we have to own the latest car or tech. Social media has only made it worse. Stepping back and realizing you don’t need everything marketers cleverly throw at you will already put extra money in your pocket.
Of course, this is much easier said than done. It would be great to have the lavish lifestyle that wealthy people show on Instagram. But if you’re looking to save money so that you can become rich, that will have to wait.
5) Learn How to Budget—Wisely
That said, we don’t believe in penny-pinching. If saving money on all fronts makes you miserable, it’s not sustainable and you won’t reach your goals.
Start your budget with this in mind: if you make money, you can spend money—just be smart about it. We suggest following the 50/30/20 personal finance rule.
That means putting 50% of your net income (after taxes) aside for your needs. This includes housing (rent, mortgage, and other fees), utilities, minimum debt payments, car payments and gas, insurance, and groceries. The next 30% should be spent on wants. Think of it as your fun money, but you can spend less than that. Finally, the remaining 20% should go to savings.
6) Bulk Up Your Savings Fund
Having a healthy savings account is incredibly important. Life has gotten so unpredictable that having at least three months of expenses saved up, just in case, is the minimum you should aim for.
Remember, this is a necessary rainy-day fund—not something to dip into to invest or blow on extravagant things.
7) Build a New Stream of Income
Nowadays, it’s not so uncommon to have multiple income streams. Millennials, in particular, have been quick to set up a side hustle and even start their own business. It’s a smart way to make money—and you don’t have to quit your day job.
With the internet, making extra money has become easier than ever before. For example, you could start blogging with affiliate marketing through Amazon. Or you could start a podcast to build a relationship with sponsors. You could even open a small business shop online!
Invest in whatever (feasible) business idea comes to mind. Then, harness the power of social media to promote your online business. The more original you are, the more successful you’ll be.
8) Negotiate Expenses and Earnings
You’d be surprised at how willing some companies are to lower their prices once you push them. Why not give a call to your cell phone plan or car insurance provider and discuss pricing options? If you’re successful at haggling, you could save money and put it toward investing.
9) Invest, Invest, Invest!
Once you free up money, it’s time to start investing. Money makes money, so why not make your money work for you? Here are only some of the dozens of investment options available out there:
- Invest in a low-cost index fund (like Warren Buffett suggests)
- Put your money in a high-yield savings account
- Buy Certificates of Deposit from a bank with good rates
- Max out an employer-matched 401k and personal IRA account
- Buy real estate and turn it into a rental property, to make passive income
We chose to only include relatively low-risk investment ideas that will keep your money safe (but active). They’ll take a while to turn a significant profit, but slow and steady wins the race.
Yet, if you want to double your money quickly and become rich as a 20-something-year-old, you’ll have to bet on much riskier investment opportunities. The trade-off is that you stand a good chance of losing all the money you made through hard work.
With investing, it’s all a matter of weighing the risks and possible rewards.
10) Seek Opportunities in High-Growth Markets
Landing a high-paying job can make you rich if you use your money carefully. Right now, the best-paying job titles in the United States (and in the world, for the most part) are:
Do you see a pattern here? On average, those professionals make anywhere between $260k and $220k annually.
Learn How to Grow from the Best
By now, you should have a solid game plan to grow your wealth. You’ll see your net worth rise over the years—not overnight. After all, that’s how almost all billionaires and successful people got where they are.
While there are a lot of ways to become rich, most millionaires have a few things in common. For starters, most of them are self-employed. They’re also disciplined about how and where they spend and invest money. Lastly, they’ve hand-picked their careers, usually in high-growth industries.
Generally speaking, this is why rich people can spend time working on their portfolio investments and focusing on personal growth. The more passive income streams they have, the more time they can dedicate to doubling their wealth.
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