In “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.
How do I plan to get rich? By trying and trying again. As for leverage? Absolutely. It’s all about building your own platform / website. I never thought in my wildest dreams I’d be able to retire at age 34 in 2012 and just run Financial Samurai full-time. But now in 2016, I’m having more fun than ever while also making more online than I ever did at my day job working 50-60 hours a week!
Give me a lever long enough and a fulcrum on which to place it, and I shall move the world.
Archimedes, the mathematician.
RECOMMENDATIONS TO BUILD WEALTH
* Manage Your Finances In One Place: The best way to become financially independent and protect yourself is to get a handle on your finances by signing up with Personal Capital. They are a free online platform which aggregates all your financial accounts in one place so you can see where you can optimize. Before Personal Capital, I had to log into eight different systems to track 25+ difference accounts (brokerage, multiple banks, 401K, etc) to manage my finances. Now, I can just log into Personal Capital to see how my stock accounts are doing and how my net worth is progressing. I can also see how much I’m spending every month.
The best tool is their Portfolio Fee Analyzer which runs your investment portfolio through its software to see what you are paying. I found out I was paying $1,700 a year in portfolio fees I had no idea I was paying! They also recently launched the best Retirement Planning Calculator around, using your real data to run thousands of algorithms to see what your probability is for retirement success. Once you register, simply click the Advisor Tolls and Investing tab on the top right and then click Retirement Planner. There’s no better free tool online to help you track your net worth, minimize investment expenses, and manage your wealth. Why gamble with your future?
* Invest Your Money Efficiently: Wealthfront, the leading digital wealth advisor, is an excellent choice for those who want the lowest fees and can’t be bothered with actively managing their money themselves once they’ve gone through the discovery process. All you’ll be responsible for is methodically contributing to your investment account over time to build wealth.
In the long run, it is very hard to outperform any index, therefore, the key is to pay the lowest fees possible while being invested in the market. Wealthfront charges $0 in fees for the first $15,000 if you sign up via my link and only 0.25% for any money over $10,000. You don’t even have to fund your account to see the various ETF portfolios they’ll build for you based off your risk-tolerance. Invest your idle money cheaply, instead of letting it lose purchasing power due to inflation.
About the Author: Sam began investing his own money ever since he opened an online brokerage account online in 1995. Sam loved investing so much that he decided to make a career out of investing by spending the next 13 years after college working at Goldman Sachs and Credit Suisse Group. During this time, Sam received his MBA from UC Berkeley with a focus on finance and real estate. He also became Series 7 and Series 63 registered. In 2012, Sam was able to retire at the age of 34 largely due to his investments that now generate roughly $175,000 a year in passive income. He spends time playing tennis, hanging out with family, consulting for leading fintech companies, and writing online to help others achieve financial freedom.
Updated for 2016 and beyond.