Reading many "how the rich think" kind of books I've concluded that becoming wealthy is not about the next big startup, but rather handling your money wisely. When we think of the rich we immediately jump to the richest people in the country. Like Zuckerberg or Bill Gates. A pretty serious downside of this is thinking of yourself as "never gonna get there so might as well not even try". But the rich of this world are mostly actually moderately wealthy. People who have all they need and more. It's just some millions of dollars.
The books suggest a pretty straight forward plan to secure your future. Every month upon receiving your paycheck you:
- Put 10% aside
- Invest 10%
- Donate 10%
Donating keeps your head straight
Donation is the part people usually say "well yeah that makes sense" even though that's probably the only part not directly in your interest. But it does actually help you get wealthy. In my case when I give I feel like I have money to give. It's not about believing in some supernatural power rather it's just knowing where you stand and making sound decisions. Also, being humble and helping others when you have such resources is just right. There are always people in need. And you don't have to spend a lot of time pondering where to give it either. Just figure out what cause you care about (how about education?) and find a charity with most bang for the buck. Best one I've found is GiveDirectly. In any case, donations keep your head straight and keeps off the "I don't have enough" paranoia.
Savings protect you
Putting 10% aside is common sense, right? Unfortunately people don't really save that much. Not because they don't have enough money, but because they have their priorities mixed up. Okay if you're actually poor then fine, I can't help you. But you reading this are probably better off than you think. Do you have a place to live? Maybe even a car? Do you watch television in the evenings because you've clearly got time to spear? Poor people work 3 shifts a day. [Okay I'm going to stop myself from going further, you get the point].
Anyway you can probably put 10% of your salary aside for a rainy day at the expense of some comforts. Otherwise you're going to take out a loan with a hefty interest and that's probably the worst thing you can do to your money. Willingly giving it away.
Investing educates you plus if you're patient it'll free you from your job.
We all though "I'll be rich by the time I'm 30" and most of us will never be rich. I'm going to 30 right now and have realised that I am not where I wanted to be when growing up. All my decisions were based on getting rich in a few years and none of them have worked for 10 years. So this time I'm planning for 10, maybe even 20 years. This is where investing comes in. A good return is about 10% a year. So it's not going to make you rich, but it is going to double up your investments over time.
To invest you do have to understand what inflation is and predict when the next recession is, but it's not that hard really. That's actually a bonus. Reading a couple of books and articles online will actually educate you on how money actually works. There is a downside - you may become disillusioned.
What should you invest in?
Your first investment should be into books.
Get an audible.com account now and google for the best investment books for beginners. Warren Buffet for example. Also look into gold, as it's regarded as the only currency that'll keep it's value in the long run.
Who are you to talk?
Full disclosure, I'm a software developer. Not it Silicon Valley, in Estonia. My salary is above average, but for the 5 years I've had this profession I work tirelessly, I've barely bought any clothes, I drive a 18 year old car and ride the bus when I can and I've lived with my grandmother for half the time. I save everything I possibly can! I still want nice things and a home, but the only thing worth more than anything is time. And I'm not going to waste my time at a job for the rest of my life.
Okay fine, but I still don't enough to put 30% aside.
In Estonia teachers salaries are pretty low. I mean many teachers work another job just so they could teach. There's this really cool girl who got fed up with being poor and started reading about investing. At a salary of 500€ her first investment was 10€. Reading and learning as she went along in 2011 and by 2026 claims she will be financially independent.
Now take a hard look at yourself. Are you where you want to be now? Where do you want to be in 10 years and how are you realistically going to get there?
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