How Do Rich People Get Rich – It’s a dream to have a lot of wealth, but if you want to become a millionaire or even a billionaire it can require a bit of hard work. In this blog post I discuss how rich people get rich and use those ideas as inspiration for building your own wealth strategy.
Have you ever wondered how rich people get rich? I have. It doesn’t mean after reading this article you will be richer but I can guarantee by the time you are done you will know more on how to get rich than when you started the article.
Table of Contents
What do millionaires do with their money?
When it comes to investment strategies, self-made millionaires were more likely to add equity investments, while those who were born wealthy typically had more real estate investments, according to the study. Diversifying those investments is key among many millionaires.
Millionaires put their money in a variety of places, including their primary residence, mutual funds, stocks and retirement accounts. Millionaires focus on putting their money where it is going to grow. They are careful not to invest large sums into items that will depreciate. A car for everyday driving, for example, will most likely lose value over time.
The key for most millionaires is to save money before spending it. No matter how much their annual salary may be, most millionaires put their money where it will grow, usually in stocks, bonds, and other types of stable investments.
Examples of self-made millionaires
According to the same Wealth-X study discussed earlier in this article, as of 2018, a little over 265,000 individuals are considered ultra-wealthy, meaning they have a net worth of $30 million or more. Moreover, more than two-thirds are self-made. Here are three famous examples:
- Barbara Corcoran: The real estate mogul turned Shark Tank investor started her eponymous brokerage business with a $1,000 loan. Under her supervision, shegrew the business into a multi-million-dollar empire that she sold for $66 million in 2001.
- Janice Bryant Howroyd. The founder and CEO of ActOne Group started her staffing agency with $1,500 ($900 of which she borrowed from her mother), a fax machine, and a phone. She is now one of the richest self-made Black women millionaires in the U.S., with an estimated net worth of $285 million.
- Warren Buffet. Perhaps one of the most famous and richest people in the world – and technically a billionaire and not a millionaire — Warren Buffett still merits a mention in this list because he is well known for being self-made. The Berkshire Hathaway chairman and CEO made his first millions by running a hedge fund and is known for his principled and sensible approach to investing.
How rich people get rich — there are generally 4 paths to wealth
Path 1: Saver-Investor
The Saver-Investor Path is one almost any person can take. It has only two rules you must follow:
- Save 20% or more of your income by living off of 80% or less of your income, and
- Consistently and prudently invest your savings.
According to my Rich Habits Study, this chosen path took 32 years to accumulate an average of $3.3 million.
This path is not for everyone. It requires enormous financial discipline and a long-term commitment.
Path 2: Big Company Senior Executive
Working for a big company and rising up the ladder into senior management is another path to riches. In most cases, the wealth these self-made millionaires accumulate comes from either stock compensation or a partnership share of profits.
This path is also not for everyone. You must devote yourself to one company for a long time. And there are risks: The biggest risk is that you could lose your job.
A secondary risk is profitability. If the company struggles financially, for whatever reason, your time investment in the company may not be rewarded to the extent you expected.
Path 3: Virtuoso
Virtuosos are people who are the best at what they do or possess knowledge that sets them apart from the competition.
Becoming a Virtuoso requires an enormous investment in time and often money.
Skill-based Virtuosos devote themselves to many years of Deliberate Practice and Analytical Practice. Analytical Practice often requires the services of a coach, mentor, or expert who can provide immediate feedback. This feedback, in most cases, costs money.
Knowledge-based Virtuosos must spend many years in continuous study. Often this requires formal education, such as advanced degrees (Ph.D., medical degrees, law degrees, etc.).
Again, this path is not for everyone. Not everyone has the ability to devote significant hours every day practicing their skill or the financial resources to pursue advanced degrees.
Path 4: Dreamer-Entrepreneur Path
The Dreamer Path requires the pursuit of a dream. This might be starting a business. It might involve becoming a successful author, musician, actor, or artist. Or it might be the creation of an app, product, or some unique service that provides added value to a significant number of people.
You can see there’s more than one way to build wealth — but none of them are easy.
Bold Moves That Guarantee Wealth
Exploit your skill as a self-employed expert and invest in it.
Make it your goal to do one thing better than anyone: Work on it, train it, learn it, practice, evaluate and refine it. You may find most sports-players or entertainers are millionaires, and that is because they are utilizing their skills fully. If there’s something you’re good at, it is likely you can reap considerable rewards out of it.
It is the same concept of being the top of a particular field. When you are the best at something, you find that opportunities come to you. To become an expert of something, it is crucial to never stop improving. Successful people invest time, energy, and money in improving themselves, and it might just be the most rewarding investment you can ever make.
To get started, figure out what skill you want to cultivate. Make a list of the world’s ten best people at that one thing, and use this list to define criteria and track your own progress toward becoming the best.
If you’re a writer, for example, you might consult the New York Times Bestseller list, and identify the ten successful authors that you admire the most. Learn more about these writers, what they did to be successful, and read some of their work. Invest the time and energy in improving your own craft, by looking at successful past models.
Be an inventor and consider it as an opportunity to serve.
Stop thinking about making a lot of money and start thinking about serving a lot of people. If you think about what people need, or things that could improve society, your insights will have more impact. Not only that, you could be the first to produce a trending product in the future.
When you start to serve a lot of people, the effect of word of mouth is magnified – not to mention, you’ll have much more helpful feedback to improve what you do.
Having the patent of a popular invention could be the fast-lane ticket to prosper. Just look at Snapchat.
It would definitely be challenging, but consider it to be a way of serving, to benefit those who actually need your invention. No business is successful without the support of the public. Rather than squeezing every single dollar out of your customers, show them you are actually working to make them better.
Develop property.
Buying, developing and selling property has always been a major way for people to accumulate capital.
Borrowing could be a key element in this method. Say you borrow $200,000 and put in $50,000 of your own to buy a property for $250,000. Then you develop the property and sell it for $400,000. The property has increased in value by 60% but your $50,000 has now grown fourfold to $200,000. You have to select the right properties in the right areas and develop them wisely.
You are at risk from booms and busts in the property market. However, in the long term this remains a proven way to accumulate wealth.
Start your own business and eventually sell it
More and more startup have seen success with great return in recent years. If you can find a new approach towards a specific corner of the market and build a business that addresses that need, then you have a potential of success in it.
It literally can be anything: a cleaning business, a food delivery service, or a blog. It will probably take years of very hard work to build up the enterprise. All entrepreneurs will have to endure great risk and stress. But if you can pull it off, the potential rewards are huge. This is how many of the seriously wealthy people did it.
Cut your expenses.
The biggest problem in some people’s path of getting rich is that they always spend more than what they earn. Living below your means will be the easiest to get rich.
Consistently track your progress on how much you’re spending. Use an app or simply an Excel spreadsheet to make sure you always know how much money you have what where it’s going. This gives you a proper place to review and refine what does and doesn’t make sense in terms of your spending.
Start cutting the unnecessary spendings in your life. Do what you can to reduce your bills: make sure you turn off the lights, plan meals to save at the grocery store, and be disciplined about eating in. Focus your life with only the necessities and in no time you will be saving a lot more than what you previously did.
Conclusion
The question of how rich people get rich is one that has perplexed people for centuries. There are many myths about what “rich” means, and many conflicting views on how “rich” people operate. But ultimately, becoming wealthy isn’t something you need to know how to do. It is only something you need to do .