Dear Happy Investor, many people desire to become rich, yet so few people succeed. Why is that? Is becoming rich so difficult? I don't think so, to be perfectly honest. But as with everything, you have to know how to become rich. Knowledge is power, especially when it comes to money. You need to know the how. And besides the how, it is even more important to adopt the right Mindset. Everyone knows that the rich think differently, so why don't you?
In this article, you will learn how to become rich. And one thing I know for sure: this article is going to change your life. My name is Jorik Vermeulen, and I have been helping people for years in achieving financial freedom. My objective is not to become rich. I see money as a tool. Instead, I desire to achieve financial independence so I can have a life with more satisfaction, less financial stress, and more freedom.
In this article, I will help you learn how to become rich. Let us begin!
- Become Rich by Investing your Money (With Little Risk)
- Getting Rich with a Business of Your Own Next to Your Work
- Getting Rich with Real Estate
- Getting Rich with a Focus on a Higher Income
- Getting Rich with Passive Income: Making More Money in Less Time
You can only become rich by knowing how, and then continuously work on that. This starts with a basic principle for how to build wealth (prosperity). Basically, it's super simple: you get money in every month, and money goes out every month. For the low and middle class (which there is nothing wrong with), money comes in in the form of salary. And the money goes out in the form of fixed costs and expenses.
The basic principle of building wealth is that more money must come in than goes out. You can only become rich if you adhere to at least this basic principle.
However, the basis won't make you rich. You do should be sure that you stick to the basic principle, and that the “gap” or difference between the two gets bigger. Here's an example: person A gets $2,000 monthly and spends $1,800 monthly. This person builds up a monthly wealth of 200 dollars. Now we have person B who earns 3000 dollars monthly and spends 1500 dollars monthly. Person B builds up an additional 1500 dollars in assets each month.
The difference between person A and B is pretty obvious. Person B is quite smart in this case. Namely, he makes sure that:
- His monthly income is higher than person A
- His monthly expenses are lower than person A
- As a result, the difference between income and expenses is greater and he can therefore build up more wealth
In summary, the basic principle for becoming rich is that you must (1) increase your income and (2) decrease your monthly expenses.
Now, before I'll share how to get richer we will have to clear up two more misunderstandings.
By saving a lot I will become very rich, right?
Misconception 1 that many people have is that they become rich by saving. Yes, saving is better than consuming. By saving you honor the basic principle we just discussed above. You have the basics in place so that the difference between income and expenses is positive. See point 3 above, the difference between person A and B. Saving is what I call the basic level of smarter money management. But with the basics you will not become rich.
The reason you don't get rich with saving is because of time. An average person can save maybe 500 dollars a month. Maybe you can save 1500 dollars a month. That would be 18,000 dollars a year. Suppose you are 35 years old, then you can build up wealth by saving for 30 years until you retire. So then you have 30 years x 18,000 dollars = 540,000 dollars. In itself, this is good of course, but saving will not make you rich.
The first reason is that almost no one has the discipline to keep saving every year. But the biggest and most important reason is that saving actually makes you poorer because you are not applying smart money behavior. And that's because of inflation. Inflation means that every year prices go up (usually by 2%), so you can buy less. If inflation is 2% every year, and the savings rate is only 0.5%, you will become 1.5% poorer every year.
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So will I get rich by cutting back on my monthly expenses?
The second misconception is that you also won't get rich by ruthlessly cutting back on your monthly expenses either. Reducing costs by cutting back is already a step further than that the average person does. Many people simply can't do it. Mostly because of lack of discipline. Because if you earn more, you also tend to spend more. That is purely human behavior going back to even our ancestors (eat your food fast, because there is no guarantee for tomorrow!). Luckily we can do something about this tendency, and that is by setting and achieving goals and changing our money (spending) habits.
The reason we don't become rich by cutting back is that at some point we can no longer cut. Life needs to remain fun and valuable. Getting fulfillment out of life is more important than getting rich. So you can't cut back endlessly and go live on the street with your family.
I would say: try to save by spending less money on luxury items. Try to cut your monthly expenses by 20%. That would be great!
Luckily, there is a better way to become rich.
So we don't get rich by saving nor by continuously cutting back on monthly expenses. Then how do we become rich? Above, we talked about the basic principle of building wealth, right? Go back to the three differences between person A and B, and look at point 1. Point 1 is a higher monthly income, so you make the difference between income and expenses bigger. And that's exactly how people get rich: they put the focus on making more money. That starts with knowing how to make money easily. Because where you can save only a few hundred or even thousands of dollars, there is less limitation on making money. You become rich by making thousands to tens of thousands of extra dollars every month.
To make a lot of extra money, we need to make sure we build multiple income streams. Money has to flow in through many different avenues. The more, the better. And we do this by investing. That's how the rich get so rich: they don't work for money, the money works for them.
Below I have listed proven tactics for becoming rich. Try investing your money in several of these options. Spread your money for less risk, and at the same time it also teaches you to think critically about which investments make the most money. If you want to learn more about how to make the right investments though, you should read my other articles as well.
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One of the best ways to become rich is not by working for money, but by making the money work for you. You do this by investing in assets that make money. Pretty simple: a car is not an asset, because it costs money and produces nothing. A house also basically costs money, where only the surplus value may one day yield money but that is uncertain. Investing, on the other hand, is a good investment. The beauty of investing is that you don't have to do much for it, depending on the choice you make. That's the difference between active and passive investing. With active investing, you will be trading in the short term, but this is only recommended for experts. Choose passive investing and take little risk in doing so. Because getting rich is difficult if you are in a hurry, but quite easy for those who have (and take) the time. Examples of passive investments with less risk are:
- (Government) bonds
- Real estate funds
- ETFs & mutual funds
- (Dividend) stocks
- P2P Lending
Personally, I am a big fan of real estate funds that can pay a guaranteed dividend. This means relatively low risk. For example, I personally invest in Synvest's real estate fund. For more information on this, you can read my review on SynVest, provided you find a yield of 8.3% attractive? 😉
In the listing above, you'll find a few ways to invest with relatively low risk. I have elaborated on these and other options in a comprehensive article that deals with investing without risk. In which I answer the question of whether investing without risk exists. And if so, how do you do it?
Of course you can earn a lot of money when you have a career. And if you also negotiate smartly for a higher salary, then you can definitely make good moves. But it is not that easy. The big problem with a salary through an employer is that the employer determines your salary. By performing excellently and negotiating well, you can exert some influence on this, but by no means 100%. For more control over your income, you will have to take matters into your own hands. This is perfectly possible with a side hustle.
A side hustle is a term that stands for a small business that you start next to your full-time job. So you work 40 hours, but in your spare time you start your own startup. You can do this as a self-employed person, or you can start an online business. Personally, I prefer an online business. This takes a lot of time to build up, but the advantage of online is that it can grow exponentially. Often practice shows that a side hustle over the years grows into a full-time business. Some tips for this are to start something you are really passionate about. What are you really excited about? It is also good to start small, in a specific niche. A niche is a specific target group such as female goalkeepers, which is a specific group within (women's) soccer.
Building your own business is certainly not easy. It takes passion, but above all a lot of focus and dedication (read: self-discipline). A good book that helps you get started is the 100 dollar start-up. It teaches you step by step, in a fun way, how you can start a small business with a very low budget (100 dollars).
An excellent way to get rich is through real estate. In a very extensive article, I described everything about how to get rich with real estate and real estate funds. You can find the article on my website.
I've also mentioned above that I invest in real estate funds. Real estate is in fact interesting for those with a high starting capital (from 50,000 dollars). But smaller investors can also reap the benefits of real estate investments thanks to real estate funds. For example, in another article of mine, you can read about my experiences with non-listed real estate fund investing. There you can also read how much return I made with them, and what you can do as well. It is in fact quite simple. You create an account and you deposit money. And that's it. You literally become richer by sitting on the couch, exercising, or sleeping.
That's the power of money: money makes more money, so let money work for you and starting living!
Getting rich is done by focusing on building a higher income. Reducing your expenses can only be done up to a certain level. After all, you do need basic necessities such as a house, transportation, clothing, food, etc. But income has no limit. But there is no limit to income. It is possible to double or even increase your income tenfold. This makes the gap between expenses and income larger and larger. You can use the difference between the two to invest, which will make you richer and richer.
Have you ever heard of passive income? Many people don't understand this concept, and therefore they don't believe in it. After all, how can you make money without having to work a lot for it? They don't see it because they didn't grow up in the 21st century where there are no boundaries thanks to the internet. Admittedly, building passive income is not easy. For example, I have done a lot of research on this, which I explain in my book on Making More Money in Less Time (see link for this below). Nevertheless, it is definitely possible if you know how (which is why I wrote the book). To get you started, here are some good ideas for passive income.
Getting rich is easier than you think. Building wealth and prosperity don't have to be complicated. In fact, you can just have it done for you by choosing the right investments. But then why don't many people do it? One of the biggest reasons is ignorance. People simply don't have the knowledge about how to get rich by investing. This lack of knowledge results in fear. Fear of the risk they are taking with investing. Yes, when you start investing in growth stocks (as I do myself), you can experience major setbacks due to a big dip in your returns.
Yet becoming rich is easy. It is 100% achievable for those who are patient. All you have to do is keep your costs low, increase your income, and invest all your money in investments with relatively low risk. My advice: invest as much of your money as you can afford in low-risk investments. You have already read one of my best investment tips for this, namely in point 3 about getting rich with real estate.