The easiest way to become rich is to be born rich. Since we cannot control the circumstances of our birth, the next best approach is to curb spending, earn more, save, and invest. You don’t have to be lucky or born into wealth to become rich. What you need is a thorough understanding of how to grow wealth and become rich. In this article, we explore the top 3 ways you can become rich.
This may seem like one of the most obvious ways to become rich, but you’ll be surprised to know how often it’s ignored. Spending every penny of your monthly paycheque and then borrowing some money through credit cards jeopardises your chances of becoming rich. While splurging on vacations, cars, and expensive clothes once in a while is fine, doing so every month will burn a hole in your wallet.
Lifestyle inflation is a common consequence of career advancement. In other words, as you move up the corporate ladder, you earn more and, therefore, spend more. Your discretionary spending skyrockets to keep pace with peers, often even resulting in debt. To become rich, you must curb the desire for lifestyle inflation to save and invest. Living below your means can help you build a wealth corpus over time. Automating savings such that a fixed portion of your income is directed into your savings and investment accounts, maintaining a ledger of your bills and purchases, and monitoring day-to-day expenses are some of the easiest ways to live within your means.
Regardless of how frugal you are, you cannot become rich if you don’t earn enough. While limiting spending and prioritising savings are key components of prudent money management, there are only so many expenses you can cut. If your earning potential is limited, you cannot become rich by simply leveraging good money management strategies. Thankfully there are various ways you can boost your earning potential. You can negotiate a raise or work extra hours to capitalise on overtime payments. You can also get a side hustle as a freelancer to capitalise on the modern gig economy or monetise a hobby to add a supplementary income source to your budget. Upskilling and training pay off in the long run, helping you secure better-paying jobs. You can even consider switching career paths if possible to boost income. Self-made millionaires often suggest ‘job hop’ as a prudent strategy where you seek out a new job every 2 years and secure a 25% raise to effectively boost your earnings. Remember, the most effective path to earning more will depend on your circumstances, resources, and experience.
While saving money is the first step to becoming rich, it is not enough. Investing is the next logical step that can help you build wealth over time and become rich. Once you have saved enough to create an emergency fund, you don’t need to stockpile cash. Instead, you need to use the surplus funds to invest in assets that will appreciate over time. Your investment strategy can vary depending on factors like your age, risk tolerance capacity, and goals. Some common investment instruments include FDs, stocks, mutual funds, ETFs, commodities, properties, REITs, art and collectibles, and gold. For instance, if you have a low risk appetite and prioritise capital preservation, you can invest your funds in FDs. However, if you have a high risk tolerance and want to become rich quickly, you can invest in a diversified portfolio of equities, mutual funds, and ETFs.
Remember that the success of your investment plan depends on your investment strategy. Experts suggest investing in a diversified basket of assets to build a well-diversified portfolio that can balance risk and return, while offering tax benefits. While the total funds you direct to investments may differ, experts suggest investing 15%-20% of your post-tax income. The key is to start early and there is no better time than the present. Remember you always can start small and then ramp up investments as your income grows.
If you’ve grown up looking at people living paycheck to paycheck, you may assume that becoming rich is difficult. While it can be daunting at first, understanding the key ways to become rich can help simplify the process. The key to becoming rich is to spend less than you earn, boost your earning potential, and invest the saved funds wisely. In other words, a disciplined and consistent approach can help you become rich and achieve your long-term goals with ease.
The top 5 tips to becoming rich include start saving early, avoid overspending, save 15% of your paycheck every month, boost your income, and invest wisely under professional guidance (if needed).
Being debt-free indicates that you have prudent money management skills. However, it does not necessarily mean a sizable wealth reserve.
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