“Because no one wants to get rich slowly.”— Warren Buffett
The answer to the question in the title of this post is simply, “You get rich.”
Jeff Bezos, Amazon CEO, and richest person in the world, asked the greatest investor in the world Warren Buffett why doesn’t everyone copy Warren’s simple method to investing and subsequently become the third richest person in the world like Buffett. Warren answered, “Because no one wants to get rich slowly.”
How true. In a world where food is delivered in minutes, we can fly to the other side of Europe in hours, we can watch anything we want in a couple of seconds and a couple of clicks, we can pop to the local shops and get the most exotic out of season fruit and vegetables 24 hours a day, we can see and talk to people in other continents as if they were in the room with us, as a society our patience is non-existent.
So if we decide one day we want to be rich, then we want to be rich that evening, or tomorrow at the latest. We don’t care if we’re drowning in debt, have expenses like an American socialite, and not a penny saved. We want to be rich, right now!
So instead of doing our research about how to become rich and finding out that almost every single rich person got rich slowly, we try and get rich with schemes like: the lottery, pyramid schemes, franchises, investing in individual stocks that we know nothing about, investing in bit coin or whatever is the latest tulip craze, gambling, stealing, selling Buckingham Palace to wealthy idiots who think you’re a member of the royal family.
Successful get rich quick schemes are as rare as men giving birth to chickens.
So, we’ve established that it is almost impossible to get rich quick, that then leaves us with only one alternative, and that is to get rich slowly. And how do we do that?
This is how:
- Financial goals – set financial goals. How much money do you want, by when and how will you do it?Financially organised – get financially organised by knowing how much you receive in income, how much you spend in expenses, how much debt you’re in, and how much you spend with the money left.
- Debt – pay off all debt as fast as you can. Debt is a right git.
- Expenses – reduce or eliminate expenses, every pound you reduce an expense by, that’s another pound you can save to get rich.Save – set up automatic saving (standing orders) so that money leaves your bank account as soon as you get paid. The more money you can save, the quicker you’ll get rich.
- Increase contributions – If you’re saving 15% of you net income, in a couple of months move that up to 16%. Then a couple of months later, 17%. Keep nudging it up as much as you can. And when you get a pay rise increase it again.
- Increase income – ask for a pay rise, learn more skills, move jobs, get a second job, get a third job the earns passive income. Earn more and save the difference.
- Invest – invest in the stock market every month, forever. Use low cost index funds like those provided by Vanguard or other low cost providers.
- Own other assets – own rental properties or businesses to get other passive income.
- Reinvest – Dividends you earn from investing should be reinvested.
- Compound interest- as above. The rich person’s magic formula is compound interest. It means the money you earn in interest goes on to earn more money and then that money then earns more money and so on like that forever and ever. An army of money working for you 24 hours a day, every day of the year.
If you do the above, as the years fly by, you’ll discover all of a sudden you’re rich and you’ve enjoyed the process, which also gives you a path of how to continue to build and retain your vast wealth. People who get rich quick don’t understand about building wealth and retaining it. A shocking statistic I heard is that you’re more likely to go bankrupt when you win the lottery than you are if you never won it.
Get rich slowly. It’s a life choice.