5 Hard Things You Need to Do to Get Rich
Building wealth isn't complicated, but that doesn't mean it's easy. These five choices can be difficult to make consistently.
Chances are you’ve heard the standard advice about how to get rich: Spend less than you earn, invest, avoid unnecessary debt and give your money time to grow. Problem is, knowing what to do isn’t necessarily the difficult part. Consistently following through on those actions can be the true challenge.
To build substantial wealth, you may have to say no even when you can afford to say yes. Getting rich may mean taking some calculated risks and sticking to a plan, even when you’d rather change course.
It’s not easy, and if you want to build wealth, you’ll need to be prepared to make some specific choices.
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1. Live below your means even when you don't have to
Living below your means is different from simply being able to pay your bills. As your income increases, there’s pressure and a natural desire to upgrade your house, car, vacations and other lifestyle elements. Those large purchases can quickly erode the wealth that you’ve built up, setting you back from your goal.
What’s more difficult is letting that gap between your income and spending grow. Upgrading your lifestyle may be tempting, and you’ll need self-control to stay focused on your goals and to continue living on less than you make.
Avoiding lifestyle creep is key to building wealth, since it leaves more money available to invest and build your assets; that’s where the real wealth-building power lies. Compound interest, in which your earnings start to generate their own earnings, can accelerate your path toward becoming rich.
There’s nothing wrong with enjoying your money, and doing so periodically can help to keep you motivated to continue working and building wealth. The issue is letting every raise permanently increase your cost of living through an expensive upgrade like a larger house or a new car.
2. Get comfortable watching other people spend more than you
Your friends, neighbors and colleagues may have a bigger house, a new luxury vehicle or seemingly endless vacations, and you’ll need to get comfortable with that scenario for years. Trying to keep up or even using their situation to justify your own spending can divert money from investing and other long-term goals.
Remember that appearances can be deceiving and you can’t tell much about someone else’s financial situation simply based on what they own. A high-spending lifestyle isn’t necessarily evidence that someone’s wealthy, and they might be financing their lifestyle through debt.
If you’re patient and don’t try to keep up with others, you’ll make more progress toward your own financial goals.
3. Put a set amount of money away before you can spend it
It’s important to be intentional about saving money. Saving whatever happens to be left over at the end of the month often isn’t enough to build substantial wealth. To build wealth, you may need to treat investing as one of your biggest recurring expenses, which means setting aside a meaningful amount of money to invest each month.
As your income grows, revisit and increase your 401(k), IRA and brokerage contributions. Where appropriate, automate your contributions so they become a standard and recurring part of your monthly budget.
Prioritizing investing can be difficult, since the money is technically available to you today. When you invest, you’re choosing to give your future self first claim to the money, and that may mean that you need to cut your spending or go without a big purchase in the meantime.
Not every dollar you set aside needs to be invested. Money you may need sooner, including your emergency fund, can be kept in a savings account where it’s accessible and protected from market swings. And with competitive high-yield savings accounts paying attractive rates, it’s worth making sure your cash is earning as much as it reasonably can.
Use the tool below to explore and compare some of today's top savings account offers:
4. Take calculated risks with your money
Building wealth often requires taking some risk. Keeping all of your money in cash can feel safe, but you may need to accept some investment risk — and some potential loss — on a long-term path to getting rich.
That doesn’t mean investing on a whim in a business you have a good feeling about or on a tip you heard from a friend. Calculated risk is part of investing, and it helps minimize the chance of you losing your money.
Diversified stock investments, real estate or business ownership may fluctuate or fail to perform as expected, but going into those investment decisions well-informed can minimize the risk you’re assuming. Avoiding risk entirely has its own cost and may cap your earning potential.
You don’t need to chase hot investments or make enormous bets, but building wealth involves some uncertainty.
5. Be boring for a very long time
Though there are certainly exceptions, building wealth doesn’t usually come from one brilliant stock pick, side hustle or financial decision. It’s boring, and it’s the result of years or decades of investing, reinvesting, controlling spending and avoiding major mistakes.
Markets will fail, trends will change and you’ll make mistakes. You’ll question yourself and may be tempted to jump to a venture that appears to offer a faster route to wealth. What’s hard is resisting the temptation to question or change your strategy, allowing compounding and time to do their work.
Building wealth is boring, and you need the patience and faith to simply be boring.
Getting rich is often about what you don't do
Building wealth sounds simple on paper. It’s often much more difficult to put into practice. Building wealth often comes down to what you don’t do, rather than making some strategic action or jumping on the right stock at the right time.
You don’t necessarily have to pursue a lifestyle of extreme sacrifice, but you may need to become comfortable making choices that don’t always result in an immediate payoff. It’s hard work and will be uncomfortable at times, but if you’re dedicated and stay consistent, the sacrifices you make now can pay off later.
Building wealth takes consistency, but you don’t necessarily have to figure out every decision on your own. A financial advisor can help you create a strategy around saving, investing and other long-term goals, and adjust that plan as your finances change.
Use the tool below to connect with a vetted financial professional today:
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