So You Want To Be Rich Eh?

Palace of Fine Arts San FranciscoIn “How Do You Become Rich?“, Finance Fox pens a 1,200 word post on what it takes to reach the promised land.  I immediately checked out the post because I’m always fascinated about how others define rich and how others plan to get rich.  Eddie’s definition of rich is “having a fortune over $1 million bucks.”  $1 million bucks is a good amount of money, but at what age?  At 35, that’s pretty darn rich.  At 70, not so much.

Eddie then goes on to ask what is the secret of successful rich people?  My answer is almost always, PERSEVERANCE.  The ability to solider on and not give up even in the worst moments.  Every single wealthy person I know has had some tremendous disappointments in their lives, but they don’t stop trying.

The more critics there are, the greater the wealthy person’s fire is to succeed.

FEAR OF FAILURE

I’m absolutely afraid of financial failure, which is why I have a tendency to build up enough income buffers so that in the case a business idea fails, I won’t be left completely distraught.  I also find money to be very manipulative.  As a result, if I can do things NOT for the money, I feel I will produce a better product, which may ironically bring more money in the future.

Just the other week, I got my butt whipped 0-6, 1-6 in tennis because I entered a level higher than where I usually play.  It was slightly embarrassing losing in front of so many people, but I came away invigorated.  I put to rest I cannot play that level of singles, and refocused my efforts on doubles instead.  My opponent is ranked #1 in his age category and I was proud to at least try.

My mantra is, “I’ll never know unless I try.”  I don’t mind whiffing badly.  At least I’ll learn from the experience so I can continuously make the product better.  The educational aspect of failure itself is something of great value.

AND THEN THERE’S LEVERAGE

Rich people leverage everything – time, technology, and money.”  To that point, I agree completely.  Leverage is a beautiful thing on the way up, but a disaster on the way down.  Hence, back to the word, perserverance.  If people can hang on to their leveraged assets for a long enough period of time, chances are, they will make money back and then some.

US housing in the 1980′s is a fantastic case study where those who sold during that downturn severely kicked themselves in the nuts when the housing market rocked higher for the next 20 years.  Their leverage would have enriched them greatly had they held on.  It’s the same thing for forced sellers of housing and stocks in the past four years.  10-15 years from now, we are going to look back at the period between 2008-2011 as a wonderful time to buy.  Things have already begun to heat up in 2012.

CONCLUSION

How do I plan to get rich?  By trying and trying again.  As for leverage?  Maybe.  I prefer to use the word scalability.

Give me a lever long enough and a fulcrum on which to place it, and I shall move the world.

Archimedes, the mathematician.

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Photo: Palace Of Fine Arts, San Francisco,

Regards,

Sam

Sam started Financial Samurai in 2009 during the depths of the financial crisis as a way to make sense of chaos. After 13 years working on Wall Street, Sam decided to retire in 2012 to utilize everything he learned in business school to focus on online entrepreneurship.

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Comments

  1. Eddie says

    Hi Sam!
    Thanks for the love.
    I like your adopted mantra, its very similar to those of the rich, and the fact that they leverage a lot more than the average person. I think this is what separates them vs. the majority who prefer comfort.

    You also raise a very good point. A million bucks is great at 35, but even at 60 I’d be happy with it (as long as retirement was 2-3 yrs away). The obvious is that the earlier you get to the “mill” the more options you have to do with it.

    Whats the biggest thing you put leverage on?
    Did you ever experience the downside of leverage?

    Cheers.

    Eddie

    • Financial Samurai says

      My biggest leverage is in rental properties and my own house. Great on the way up, depressing on the way down.

      What I remind myself is perseverance all the time. Housing is one of the easiest things to hold onto because there isn’t a price quote flashing in front of your eyes every day. You simply live life and enjoy for the most part, and keep up the maintenance work. Rental property is generally a “set it and forget it” asset if you can screen like the CIA and get the right tenant!

      Other than properties, I’m not levered, except for the online trading account which CAN be levered 4:1!

  2. Lance@MoneyLife&More says

    I feel that a lot of people do freak out and sell. You really do have to stay the course.or I feel you will miss a lot of the big rallies. Buy low sell high, not the other way around.

  3. krantcents says

    Risk is individual and we all interpret it differently. Buying income property was conservative because of my approach. I think approach to problem solving changes many kinds of investments. Putting $10K on the craps table is risky, but putting it in a well priced home in a good location is a winner. BTW, my mantra is the most determined person always wins!

  4. retirebyforty says

    I agree with you on perseverance. If you keep trying, you’ll get there eventually. Housing should be easy to hold on to because when you purchased, you should be ready to pay the mortgage and other cost. I guess if you lose your income, it will be a big problem.
    I’ll head over to Finance Fox now.

  5. Thomas - Ways to Invest Money says

    I really like the perseverance aspect of it. I also feel that too many people follow the wrong “crowd” too often. I see people consistently buying cars and clothes and wondering why they never get ahead. That money could be better spent on investments, cds, real estate etc. Many times you hear I don’t have money but like Sam states all the time you have to start somewhere and be able to stick it out when it gets a little tough. As with anything nothing is guaranteed so it is best to have several different things going. 10k here, 10k there, another 5k until you’ve built up a nut to actually start making more money.

    • Financial Samurai says

      I just read a blog from a 2 year out college undergrad in a lot of student loan debt who just paid $18,000 cash for a new car. She raided her retirement savings account.

      I donno… maybe we’re all going to be just fine.

  6. Jason says

    I love the thoughts and concepts of building wealth but it isn’t something I’ve particularly gotten into as we’re still working our way out of debt. Once that we’ve reached the top of that mountain then we’ll be on to more important things.

    Once we get there though I plan on having a few different revenue streams and investment options: real estate, P2P lending, and traditional mutual fund investing (primarily in retirement accounts).

  7. San Diego says

    Sam you are hitting on a subject that reminds me of a presentation I saw by Vinod Khosla (he started Sun Microsystems and now runs a venture capital firm). Vinod attributed his success to taking risks and failing. Everytime he failed he learned from the experience and like you said “I don’t mind whiffing badly. At least I’ll learn from the experience so I can continuously make the product better. The educational aspect of failure itself is something of great value”. Vinod is quite a good presenter and has a fresh perspective on the relationship between failure and success, the presentation can be found at the link below (this is not SPAM) or by going to http://www.khoslaventures.com/papers-presentations.html and selecting the video “2012: Failing to succeed (Harker research symposium)”…

    http://fast.wistia.com/embed/iframe/57265961ef?version=v1&videoWidth=640&videoHeight=360&volumeControl=true&controlsVisibleOnLoad=true&autoPlay=true&popover=v1&plugin%5Bsocialbar%5D%5Bversion%5D=v1&plugin%5Bsocialbar%5D%5Bbuttons%5D=embed-email-twitter-tumblr-googlePlus-facebook&plugin%5Bsocialbar%5D%5Blogo%5D=true&plugin%5Bsocialbar%5D%5BbadgeUrl%5D=http%3A%2F%2Fkhoslaventures.com&plugin%5Bsocialbar%5D%5BbadgeImage%5D=http%3A%2F%2Fembed.wistia.com%2Fdeliveries%2F9075d7923418764ec71a6c0601d0b6493c0d6cf9.jpg%3Fimage_crop_resized%3D100x20

  8. Kathryn C says

    Full discloser: I AM PLUGGING MY BLOG RIGHT NOW….
    Check out the pic from Ira Glass I just put up yesterday. Exactly what you’re talking about Sam…. the secret of successful people = perseverance. As you say…. “The ability to solider on and not give up even in the worst moments.”
    good stuff.

  9. Untemplater says

    I don’t think a certain number makes someone rich but I agree with perseverance and setting goals. It’s so important to learn how to set and stay within a budget and to pay down debt. Every dollar counts! I also think the less desires we have for material things the richer we become.

  10. Kathleen @ Frugal Portland says

    I like this, and I’m also fascinated by people using the word rich — rich isn’t something to which I aspire, nor do I think I’ll achieve. I think that when I’m ready to invest again, I’ll know I can’t do worse than investing money I didn’t have into a business that paid out zero dollars with interest, so I’ll be willing to risk it.

  11. Shilpan says

    There are two reason why you want that million dollars at age 70, and not at 35. 1) You may not be financially matured due to young age, so you can blow it away faster than a wise guy at 70. 2) With your Social Security income, you can live off of the 6% return on the million dollars at age 70 as you don’t need much to live at that age. Just my 2 cents. :)

    • pcash says

      I think someone who is able to attain that million dollars at age 35 (not through inheritance or lottery, but hard work, saving and wise investing) will be financially mature.

  12. Janna says

    Hey – you won one game! Don’t give up completely on playing singles at that level. Do it occasionally…. it’s from playing with those who are better than you that you are going to learn the most!

  13. JT says

    Leveraging time and money.

    Like you, I also prefer the word scalability – focus on something that can be scaled indefinitely, or at least bigger than a 9-5. Growth – linear or exponential – is everything.

  14. Buck Inspire says

    Awesome point about perseverance. You are right, rich and successful people never give up. They would die trying. As for leverage, you have to find that balance. When things start going the other way, you have to be nimble enough to unwind those positions. Love your tennis story. Way to give it a shot. That reminds me of my own tennis story. I took a beginners class in college. There was a ringer, just smoking everyone he faced. Not even sure why he was there. Inflating his ego as he dismantled us newbies? Anyway, I was fired up to give it my best shot. I didn’t win any games, but I made him work for all his points. He could see I was working my ass off and made him sweat some too. Rather than report our score as 6-0 to the coach. He massaged it to 6-3 as a show of respect. One of the few times I persevered against great odds. I really should do this more often. Doesn’t hurt right? Thanks for reminding me!

    • Financial Samurai says

      Good story on tennis! For the winner, why not right? Shows good will and sportsmanship.

      Folks need to set some strict stop losses. If they are followed, you’ll always know the max you can lose!

  15. Matthew says

    You know, if I would have acted in the right manner when I first gained perspective of investing at age 16, if i ignored the voice of my family and the people around me telling me how much risk there was (as if they really knew firsthand, they didn’t invest) if i would have listened to the voice inside to sacrifice, I would have made millions by now. I have spotted big investment opportunities and almost invested. But I didn’t. I am 25 now. I almost invested in an oil company that would have yielded a huge return at 16. I almost invested in apple when it was at $6 per share but I didn’t and now its huge. I have had so many opportunities to build wealth through real estate, but listened to the wrong voice. I have focussed so much on the gambling idea of investing that my family instilled which isnt even accurate. Every time we go to the store, we spend money, every time we go to fill up our gas tank, or purchase a car or purchase something society says we “need” lol we are losing money. Some has to be spent, most could be sacrificed. I also owned my own business, in which i was bringing in $500 An hour for a while, however. I sold it and I did not invest. WHAT AN IDIOT!!! I got myself into some debt.

    I am now determined, after being an idiot not learning from mistakes for so long…to get myself out of debt and invest. A few good lessons in all of this, don’t listen to broke peoples wisdom. Do what 99% are not willing to do in order to achieve that which 99% does not have. I have learned that owning a business gives more access to cash.. unlimited access. I had always been told to get a job. I learned what creating my own was like. NOTHING BEATS IT!

    I am inspired to get wealthy now. lol

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