Author: David

It’s actually not that difficult.

First of all, let me tell you that this post is about getting “automatically” rich in the long term.  How about the short term?  YES, getting rich in the short term  or near future can be done quickly too, although not “automatically”.  I will talk about that in another post (watch out for it, coming soon!).  But on to this post, about getting rich “automatically” in the long term (like for retirement, etc.)…

Before you get angry at me for telling you to “earn more and save”, you’ll be surprised as to how “automatic” this earning and saving can be, and how automatic this saving can add up (and “compound”) into a million dollars. If you’ve watched any of my videos on future value, you already know the power of interest in making money grow. Furthermore, the effect of future value of money goes quicker when it is “compounded” (meaning your $100 earns 10% the first year and becomes $110 at the end of the year. In the 2nd year, you earn 10% on the new $110, so at the end of the 2nd year you’ll have 121, etc. and this interest just keeps growing bigger).

Here’s the kicker… this “compounding” grows tremendously when, instead of just earning or saving extra and investing it, you save/earn at regular intervals. Just to demonstrate: If you’re 30 years old and you earn/save an extra $26/day (or earn/save an extra 9,500/year) and invest it in a bond earning 5% a year, you’ll have an extra $1 million by the time you “fully” retire at age 67 (nowadays, we work way past 60, and it may even be good for health and prolonging your life).  If you start just 5 years earlier it’s even more amazing… your 1 million will jump by more than 300,000 to $1,348,000 by the time you’re 67. Yes, there are other things to consider such as inflation; but the point is that becoming a millionaire can still be “automatic”.   If you’re willing to take more risk and, starting at 30 years old, start investing regularly in the stock market S&P 500 (instead of a bond) whose annual average return (1950-2009) is 7% already adjusted for inflation and despite ALL the stock market crashes (Source: simplestockinvesting.com), then you could have your inflation-adjusted “automatic” 1 million dollars earlier, by the time you’re only 61. (What if you’re already kinda old?  Is it too late?  Nope… read below.)

*Note: I recommend consulting your personal CFA or CFP before making any investment decisions.

Of course, how do you save more and earn more?

Firstly, look at the non-productive expenses in your life.  I like the way famed author Robert Kiyosaki “redefines” the meaning of “asset vs. liability” in his book “Rich Dad, Poor Dad: What The Rich Teach Their Kids About Money – That The Poor And Middle Class Do Not!“.  In Kiyosaki’s definition (not your traditional accounting), if something puts money in your pocket now or in the future, then that thing is an asset.  If it takes money from your pocket, it’s a liability.  For example, traditional accountants (and biz students!) classify a new car as an “asset” because it has “value”.  Kiyosaki classifies it as a “liability” because a) it loses it’s value by 20% (and reduces your wealth!) the moment it rolls out the showroom, and b) it takes money out of your pocket in the form of mortgage payments.  Traditional accountants may classify educational school fees and tutorial fees as “expenses” because you “pay” for them. However, if this education helps us earn money, it could be reclassified as “assets” because they may cause people to save more and earn more in the future.  If  you’d like to read more about Kiyosaki, you can check out the Amazon reviews by clicking here or below.  You’ll be shocked at some of his insights which go against traditional education, and he even seems to  imply that a lot of traditional education is bad; although he stresses the importance of financial education and financial literacy.  (this blog post continues below)

Secondly, save on the right things, don’t scrimp on the wrong things.  I’m amazed about how many people I’ve met who blow a lot of money on cafe lattes at stylish coffee chains, but will scrimp on amazing stuff which can help them get higher grades and a much higher paycheck, and yet they complain they don’t have enough money to save anything (yes, that’s the reason why I compare my premium tutorials to cafe lattes).   How much more extra salary could they make if they graduated on time (or even earlier!) and/or with better academic records?  How much would they save on extra school fees by not having to take the subject again?  The list goes on and on..  Nope, I’m not the first person to compare savings/earnings to coffee lattes or to use the word “automatic millionaire“.  These concepts were actually popularized by famous Oprah-featured author David Bach in his book “The Automatic Millionaire” where he demonstrates the power of saving, investing, and compounding and becoming a millionaire by giving up little things like coffee lattes.

How about if you’re old?  Is it too late?  David Bach has a new book out “Start Late, Finish Rich” where he discusses how it’s not too late and how stuff can still be done to save more and earn more, in time for retirement. You can click on it here or below to read the Amazon reviews.

So, how about you?  What are YOUR ideas to save more and earn more (even just a little bit more!) so you can “Finish Rich“? Let’s see your comment below.