Tip #174 - You Don’t Need To Be An Entrepreneur to Be Wealthy. There are many people in the world who make lots of money by starting their own businesses or inventing something great. These people are often go-getters and have a natural entrepreneurial spirit. Being this type of person can lead to a successful business and can be a great way to make a lot of money. But is that the only way to become rich? What if you don’t have the entrepreneurial spirit? What if you have no desire to start a business, take risk, or talk people into buying encyclopedias? Does that mean you are stuck at the bottom of the wealth ladder? NO!
Anyone can become wealthy. You don’t have to start your own company or risk a lot of money to do so. You can do it quietly, little by little. A person in an office job making $60,000 per year can become wealthy. Maybe he will never be Bill Gates (but really how many entrepreneurs will be either?), but he can build up his savings and acquire wealth if he works hard at it. Some of us are not cut out to be business owners or risk takers. But you can still become rich. Really. If you earn $60,000 annually, live as if you earn $40,000. Put the $20,000 away year after year. After 10 years you will have $200,000 plus interest. If that money is earning 8% interest per year, you would have about $300,000*. If you save that amount each year for 20 years, you will have close to a million dollars. Seriously. Now imagine if you start that kind of savings when you are fresh out of college. Think about what you will have after 30 years or around the time you are 50 years old (about $2.5 million) or after 40 years (about $5.5 million). Those are some pretty impressive numbers for someone making $60,000 per year. No entrepreneurial spirit required.
Of course, not everyone makes $60,000 per year. Or you might not be able to consistently save $20,000 per year throughout your lifetime, but you can see that it doesn’t really take a go-getter, risk your shirt off your back attitude to become wealthy. It takes a desire to accumulate money by living on less than you earn and putting that money away regularly. Between that and the “magic” of compound interest, you can become rich.
In Real Life (IRL) – I have never been a big risk-taker. I am always afraid of what I might lose. I don’t think I have it in me to start a coffee-shop or even go door-to-door selling something. That is just not my personality. But I am willing to work hard to make money. Even if that means working for someone else. My income may not be as big as the person who started the company I work for, but the risks on my end are much smaller as well. That’s the way I like it. So what I have done is work hard for twenty years. Even when I was making under $20,000 per year in 1989, I put away money month after month. When I stopped working a couple of years ago, I was making $60,000 – hardly a wealthy person’s salary, especially in the DC area where I live. But I was still putting money away. In twenty year’s time, we have saved a few hundred thousand dollars – most for retirement, some for our children’s education, and some for emergencies.
Anyone can do this. Just live on less than you earn and invest the difference – year after year. No need to start a business. No need to put out any funds. No need to try to be a salesperson. Just a bit of discipline and most anyone can accumulate wealth. Really.
*I used the savings calculators at bankrate to help with the interest rate computations.
Subscribe to:
Post Comments (Atom)
5 comments:
I'm agree with the general message of this post (after all, I've been an employee all my working life, and have consistently saved a large part of my salary each year), however, there are a couple of problems with the figures you quote in your example:
1. If you earn $60K and live (spend) as if you were only earning $40K you'd NOT have $20K to save each year - taxes!
2. It's realistic to model an employee on $60K for many years prior to turning 50, but earning $60K as a 20-year-old graduate straight out of college?
3. You'd have to be something of a risk=taker to average 8% return on your invested savings. A risk-free bank savings account won't do it. Property and stock investments, with some borrowings, might.
4. The figures always look great for 20- or 30-years of compound interest. But you have to allow for inflation. $1m 30 years from now will NOT be enough to be considered wealthy. And if you were basing the calculations on averaging 8% real (inflation adjusted), after-tax ROI you're dreaming.
Where were you when I was blowing my money on cars and travel way back when? haha! I wish I had been more forward-looking, but I'm trying to make up for it now! Great post
Enoughwealth,
Thanks for your comments.
1. You're right there are taxes to consider. Of course, some of the savings will likely be pretax savings like a 401(k). However, the point of this post wasn't really to tell someone who is making exactly $60,000 how far their savings will go if they put away $20,000 per year. Most of my readers probably making a different salary amount - maybe $40,000 or maybe $70,000. The point is, that if you can save a percentage of your salary year after year, then you can become wealthy - not Bill Gates wealthy but comfortable.
2. And while a steady $60,000 is unrealistic, I didn't want to get into complicated math problems to illustrate my point. A person fresh out of college may make $40,000 but will probably advance to greater than $60,000 by the end of his working life. I just tried to make the example simple as possible by using a steady $60,000. As I said, I started out under $20,000 and managed to amass quite a bit. And I stopped at $60K which is just what I made in the last couple of years.
3. I don't think you'd have to be a risk-taker to average 8% return year after year. Actually, that is pretty conservative. Yes, saving account rates are historically low now, but they've also been in the double digits in the past. Over a 30-year period, and 8% return is very likely in a good balanced portfolio. But even if someone wants to be very conservative, they can figure out their return with rates they expect. That's why I gave a link to the savings calculators.
4. Yes, I know about inflation. And yes, $1 million today is not the same as $1 million in the future. But I think one could easily amass $5 million over 30 years, as my example shows. And while inflation will eat some of it, it will still be quite a bit of money.
Thanks for reading my post and commenting.
I don't want to "turn" in Bill Gates, but would like to be wealthy and successful! I read a lot of articles in the Internet, and stumbled across this one http://bigessaywriter.com/blog/15-tips-on-how-to-become-wealthy-entrepreneur- feel free to read it!
Hello, Dear Loan Seekers i am Glenn Baker from United State of America (USA) i have been searching for a loan for more than 2years and all lenders i have get in touch with have rip me off more than $3,300.00, i thought there is no way i can get a loan online not on till the day a friend of mine called James Butler direct me to a legit and genuine loan lender called Mr Ramse Dave who lend me a loan of $15,000.00 contact hm if you need a loan at ramsedave121@gmail.com
Glenn Baker
Post a Comment