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What it takes to be rich

December 27th, 2006 at 05:54 am

I was reading CNN Money and ran across an article titled 'What it takes to be rich'.

Of the 4 people profiled, 3 were business owners and the 4th invested in real estate to become rich.

Although I agree that entrepreneurism and real estate offer some great opportunities to build wealth, I don't think you have to be a business owner or invest in real estate to become wealthy.

As a financial planner I have met many people who are traditional wage earners, who have become wealthy (millionaires even) by saving money and investing wisely (most did so using just their 401K).

I think that 'what it takes to be rich' is good money habits and making good decisions with your money more so than how you earn it.

What do you guys think?

11 Responses to “What it takes to be rich”

  1. Broken Arrow Says:

    I absolutely agree with you!

    When you listen to some "financial gurus" out there, you only hear the positive side of owning a business of some sort. However, anyone who has tried knows how difficult and risk-prone businesses can be as well.

    Saving and investing can work as well, but I think the trouble there is that people don't want to wait that long. More accurately, they don't want to do it "right", they want to do it "right now"! And hence the allure of anything from opening your own businesses to timing the market.

    The simple reality is that there is no big gain without big risk, but some people- especially ones that are selling you something- won't tell you about those risks. I'm not personally opposed to the running your own business, or even speculating the market, but in all that we do in life, we must proceed with our eyes wide open.

    On a separate but related note, even when you do have a lot of income, some will still find a way to let it slip through their fingers. We like to think that if we need more money, we'll simply work more. It is not without some truth, but it's only a small of the whole truth.

    I believe the large part of the truth is the ability to manage it well. I believe the secret to financial health lies in the ability to generate a positive cashflow at the end of every month, take a small percentage of that to celebrate and reward yourself for a job well done, and then take the rest of that and save or invest it in the best way possible.

    It's no good to make a lot of money if you're also spending so much that you have nothing to show for at the end of the day. Having said that, it is also important to increase our income whenever possible.

    Anyways, I'm rambling, but as you can see, I believe this very strongly. So much so that you could say that this is the foundation to my financial life. I harp on it in real life whenever the opportunity arises. Big Grin

  2. yummy64 Says:

    I think accumulating wealth - spend less than you make and invest the rest - is easy once you get the concept and start doing it! Earning more rocks but unless you get the first part it doesn't matter.

    I'm pondering the word "rich". Is rich more than you make no matter how much you make? Or is rich attainable? Hmmm. I have to ponder this...

  3. Broken Arrow Says:

    "Rich" is a bit of a slippery term, isn't it? I personally don't use it in the sense that it implies a goal. Nothing wrong with being goal-oriented, but I prefer to think of "richness" in terms of a journey, not a destination. As such, I prefer the term "financial wellness" instead. Stick Out Tongue So, much like physical wellness, I strive for positive cashflow at the end of every month. And if I do that, then I can feel good that I am improving.

    Otherwise, it can also be discouraging to see how much father we have to climb sometimes... if we are too fixated on trying to get "rich".

  4. Ima saver Says:

    I agree that it takes good money habits to attain wealth. We have never earned that much money, but we have saved as much as we could.

  5. monkeymama Says:

    I think owning a business or real estate has more risk and therefore more reward.

    My dad always ask me how my clients that are rich got there,and I Always say owning a business and real estate. But there were plenty that fell flat on their face.

    I know plenty of people who got there by simply living below their wage. Most of them will not get as far as the sucessful business owners and real estate investors. But they will get far enough, and with a lot less risk!

  6. Aleta Says:

    I think that it helps if you look at your own financials as a business. I read once to name your business or to call yourself a money manager. Sounds good to me. In otherwords, to look at what you are doing as a business and give it a name, a folder, and treat it as a business. It seems that by doing this you are giving what you are doing respect.

  7. crazyliblady Says:

    Well, having never been rich, I am not sure, but I think it probably takes a lot of time, patience, and money to get there. Most of the well off people that I know do not have debt, except for maybe a home. They tend to pay their credit cards off every month and not buy a lot of stuff. But the famous people I hear about seem to leverage themselves into Chapter 11 every few years. These are not the people I want to emulate. My problem right now is that I have over $4000 in medical bills ($1300 of it mine, $3500 my husband's). The last time that my employer renewed its insurance, my husband told me not to put his name on my insurance. This was after having to drive him to a VA hospital in a city 3 hours away on at least 5 different occasions for serious medical problems this past year. I am hoping I can convince him otherwise this coming October when my health insurance renews again.

  8. Broken Arrow Says:

    Aleta brings up a good point, and I whole-heartedly agree. When people start talking about your money or sell you something, it's time to put your business hat on. Even if it's over something small, it's a great exercise in not just mindset, but gaining everyday learning in managing our money. Instead of thinking in terms of "buying", I prefer to think in terms of "investing".

    I don't go so far as to name myself as a business, but I definitely look at it as though I am one!

  9. baselle Says:

    Others have touched on it - owning your business or being a real estate speculator involves risk, and the folks profiled have what is known as "survivor bias". If 10% of small businesses work out, yet you never hear about the other 90% it creates bias.

    Thinking of your own finances like a business cash flow is helpful - and very helpful when you start to invest, too.

  10. kristinecfp Says:

    Thank you all for the great comments!

    I keep going back to the comments about the word "rich". Probably not the best choice of words for the title of this article. Wealth or building wealth would have been more appropriate.

    Regardless, "rich" means different things to different people. The people in the article are rich in terms of money, but what about the rest of their lives? Do they get to spend time with their family? Do they get to enjoy the hobbies, sports, or other activities that they love doing?

    Although I definitely like money and the things it can bring, "rich" means much more to me than money.


  11. kristinecfp Says:

    Ima saver said: "I agree that it takes good money habits to attain wealth. We have never earned that much money, but we have saved as much as we could."

    Ima brings up a good point. Just because you make a lot of money doesn't mean you're wealthy. I've met many people who earn a substantial income, but are not wealthy because they spend what they earn - oftentimes more than they earn - instead of saving and accumulating wealth.

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