In a world filled with student loan debt, cost-of-living increases, growing inflation and sudden financial emergencies, executing this straightforward plan might sound like a fairytale.
If your goal is to get rich, check out the following eight tips on how you can sidestep the obstacles and maintain your focus. They should help you understand what it takes to build wealth and find your way to financial security.
FEATURED PARTNER OFFER
Save and invest in a custodial investment account for your kids
UNest
Minimum Monthly Investment
Gifting
Invite family and friends to contribute funds to the account
Minimum Monthly Investment
Gifting
Invite family and friends to contribute funds to the account
1. Establish Financial Goals
To get rich, you need to start by defining exactly what rich means to you. Are you dreaming about Jeff Bezos rich, or something more like $1 million in your retirement account?
No two people define rich the same way, so you should set your own financial goals and outline a plan for how to get rich on your own terms. To help shape your goals, here are some questions to ask yourself:
When do you want to retire?
What major purchasesa second home, an art collection, a cellar full of fine wineare you dreaming of?
Do you plan on starting a family?
Do you need to save for a childs education?
What does retirement look like for you? Downsizing, traveling, vacation homes on both coasts?
What kind of inheritance do you want to leave for your children and family?
Answering questions like these can help you establish financial goals and decide how much money you need to save in order to fulfill your definition of rich. Then make a budget that lets you get to work.
2. Destroy Your Debt
Not all debt is bad, but high-interest debt is downright terrible if your goal is to get rich. Part of your budget must involve a plan to crush your bad debt and maintain responsible levels of good debt, like a mortgage.
The debt avalanche method is one of the most popular ways to rapidly reduce interest costs and pay down high-interest debt quickly. With this strategy, youll put the maximum toward your highest interest rate debt and make the minimum payments on other debts.
Once the debt with the highest rates is paid in full, youll roll what you were paying over to address the next highest interest rate debt and pay it off.
While you might be tempted to accelerate paying off lower interest rate debt like student loans or your mortgage, think again. Youll save more in the long run by paying off your higher interest-rate debt first, and only then crushing that house payment and any lingering student loans.
3. Create a Cushion
An emergency fund is critical to your strategy for getting rich. This isnt your Bitcoin (BTC) stash or shares of Microsoft stock, either. Instead, its highly liquid cash, readily accessible in a low-risk savings vehicle, funded at levels that protect you from needing to take on high-interest credit card debt in an emergency.
Many experts recommend having enough money to cover three to six months of expenses in your fund, but the amount you need to feel safe could be greater or less than that. Either way, build your emergency fund, keep it in a savings account that earns a high APYand remember to top it off after you use it.
4. Start Investing Now
The longer you wait to start investing, the longer it will take to get rich. Its not enough to save money. To get rich you must put your dollars to work by investing in markets.
Broadly speaking, there are two avenues for regular people to get started with investing: a taxable brokerage account and tax-advantaged retirement accounts.
If you dont already have one of the former as part of your financial toolkit, check out our list of the best online brokers, which should help you get started with taxable investing.
You may already have one of the latter in your life, as one of your key job benefits: a 401(k) account. But dont stop there, you should also consider opening and funding an individual retirement account (IRA).
Learning how to invest is not a simple task, but the time to get started is now. Dont be intimidated by the process: Start small, utilize the educational resources that are available on the platforms above and remember that the most important thing is to sustain regular contributions to your investment accounts.
Featured Partner Offers
1
SoFi Automated Investing
1
SoFi Automated Investing
Annual advisory fee
0.25%
5. Diversify Your Portfolio
If investors have learned anything from the crypto crackup of 2022, hopefully, its not to put all your eggs in one basket. That also happens to be one of the key concepts of investing: diversification.
Once you begin your investing journey, you need to always keep in mind that building a diversified portfolio is essential to getting rich. It protects your wealth from the big wipe-outs that can happen when you only own a single type of asset, whether thats crypto, yesterdays hot stock, or the new wonder investment your neighbor told you about.
Building a diversified portfolio means understanding asset allocationputting your money into a mix of different asset classes aligned with your goals.
When youre younger and have more time to build wealth, you can take on riskier investments because you have plenty of time to recover from inevitable market declines. The older you getand the closer you are to your definition of richyou should shift to less risky assets to preserve the wealth youve built.
Check out our basic asset allocation models to understand this core concept on a simple level. The most effective way to get rich is to learn about investing yourself, but you might also consider hiring a financial advisor to help you maintain your investment portfolio.
6. Boost Your Income
The more money you earn now, the faster youll be able to achieve your goal of getting rich. Boosting your earnings potential today helps you build a virtuous cycle of earning more, investing more and getting closer to your goals.
Perhaps the easiest way to boost your income is by seeking advancement in your current positionalthough if thats not in the cards, dont be shy about considering a career change. Some ways to up your earnings include:
Document your achievements, then use them to strengthen a request for a raise.
Seek out mentors to help you build the skills youll need for higher-paying positions.
Improve your skills through classes or additional education.
If the steps above arent realistic, consider changing careers to take a job with better salary prospects.
Beyond your primary career path, you can also increase earnings with a side hustle or by starting a small business. A side hustle doesnt have to last forever, but it provides a great income supplement to help you pay down debt or increase your investing budget.
7. Learn about FIRE
The FIRE movementit stands for financial independence, retire earlycould be something worth learning about if you want to get rich sooner rather than later.
Adherents of the FIRE approach to investing attempt to cut all expenses as low as possible to maximize the amount of money available to invest. Instead of spending money on car loans and insurance, for instance, a FIRE practitioner would forgo owning an automobile and riding a bicycle everywhere, no matter what the weather.
This is an extreme example, and we wouldnt really want you to give up owning a car. But some of the movements rules of thumb could be useful, like the rule of 25, which tells you how much money you need to achieve financial independence, aka getting rich.
The rule calls on you to save 25 times your annual expenses before retiring early. For example, if you spend $35,000 per year, youd need to save $875,000.
FIRE strategies can help you get rich quicker than you might without an aggressive savings plan. If youre ready to supercharge your wealth-building goals, this list of FIRE blogs can help you learn about the movement.
8. Avoid the Schemes
Theres a reason the phrase get rich quick is usually followed by the word scheme. Thats because there are vanishingly few ways to get rich quickly, and anyone telling you thats not the case is probably trying to defraud you in a scheme.
If someone whispers that they have a sure thing and you cant lose, get away from them as quickly as possible. Just know that nothings certain, few things happen as quickly as youd like, and getting rich is your reward for a plan well-executedwith patience.
blogpay
In a world filled with student loan debt, cost-of-living increases, growing inflation and sudden financial emergencies, executing this straightforward plan might sound like a fairytale.
Total Comments: 0