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Here’s the ‘Secret’ to Getting Rich: Do It One Day at a Time

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We live next door to a strip mall with a CVS, grocery, dry cleaners, restaurants and other commerce. I experience the same thing every time I step inside the CVS: Folks are gathered around the front of the store, scratching.

That’s right, they buy their lottery tickets and then scratch, hoping for the big win. It tears me apart to see people throwing $10, $20 or even more away every week, knowing that their chances of winning the Powerball lottery are 1 in 175,223,510, according to a CNN article last November. You have a better chance of getting hit by lightening! In fact, according to the National Weather Service, your estimated odds of getting hit by lightning in a given year are just 1 in 775,000.

Although one percent of the population are millionaires, I seriously doubt that any discernible percent of those millionaires got rich by winning the lottery. So how did the rest of the population make their money? Did most of them have a “grand idea” and strike it rich?

Most millionaires work day in and day out at their own business or for someone else. They live modestly, save regularly, invest and grow their wealth. The secret to becoming a millionaire is that there is no secret; there are regular wealth building habits that create long term affluence.

Do You Make Enough Money to Save Quiz? ©

Take this quiz from How to Get Rich: Wealth Building Guide for the Financially Illiterate and find out if you make enough money to save:

  1. Have you bought a coffee and a bag of chips at a convenience store this month?
  2. Do you meat meals out more than two to three times per month?
  3. Is your phone bill hovering around the one hundred dollar mark?
  4. Are you at the clubs and bars with your friends a few times per week?
  5. Is the mall your regular hang out?
  6. Do you see your hairdresser more than your closest friends?
  7. Do your sneakers sport the name of a big time basketball player?
  8. Do you believe that others must think you look wealthy?

SCORING:

Count up the number of YES answers. If you scored more than one YES, then you have enough money to save.

Before you pitch the quiz out as being too simplistic, look at this example.

Take a Few Dollars a Day and Invest it

The following uses of your money lead to lack of wealth, playing the lottery and buying lunches and snacks out. Take this example to see how simple it is to change one or two spending habits and turn them into long term wealth building habits:

Wasteful Weekly Spending:

Lottery                                                 $10.00

Coffee at convenience store        $15.00

Snacks during the week                 $15.00

TOTAL:                                             $40.00

It’s easy to blow through $40.00 per week with nothing to show for it. Skip the lottery. Make coffee at home, and keep grocery store bought snacks in the car for you and the kids. There, you cut that $40.00 to less than $5.00 per week.

Grow $40.00 Per Week into Thousands of Dollars

Does $420,000 seem like a lot of money to you? Would you be willing to bring snacks and coffee from home and quit playing the lottery for $420,000? It is ultimately possible to take that $40.00 per week, send it directly to a discount investment broker, such as Charles Schwab, and advise that broker to invest your $160.00 per month ($40.00 per week) into a diversified portfolio of stock and bond index funds.

With 60 percent invested in an international/world stock index fund and 40 percent invested in a diversified bond index fund, if world economies continue to grow and your investment earns seven percent per year, in forty years, your snack and lottery spending will amass to $420,000.

How Is This Possible?

Every time your investment goes up, you are earning more money on top of your initial money invested. This is called compounding return.  The trick is, you cannot pull your funds out. You have to keep them invested to grow over time. I know forty years seems like an eternity, but if you are twenty five, you won’t even miss the funds.

If you are older and don’t have forty years until you retire, than consider saving and investing more money.

Why Isn’t Everyone Doing This?

Because this type of information is less available than the commercials on television telling you  to play the lottery and be a big winner, or head to the fast food store and sample this newest product. Also, this strategy requires discipline. You cannot pull out the funds or your money will not grow.

That means that you have to delay gratification and save up some money for emergencies. When your car breaks down, you need another savings account with cash just for emergencies. That way you can pay for the repairs without touching your long term investing account. Saving part of every paycheck is the only way to have money for emergencies, luxuries, and long term wealth.

Photo: jasonippolito

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  • Mary

    I love it when someone actually does the math…although I saw a headline today that said 60-40 investing is a thing of the past. Regardless, saving and investing is the path to, if not wealth, at least security.

    • Neal

      Nice job Barb. I know this will be useful to readers. Amazing how simple small steps accumulate to wealth. Good work friend!

  • http://twitter.com/StumbleForward Chris Holdheide

    Great tips Barbra. Those questions really hit home for me. My family and I have stopped doing a lot of those things like going out to eat, or buying that cup of coffee. In fact we’ve even started living on a budget, and cut out credit cards completely from our financial diets and are now looking pay down our debts and save extra. It really is possible when you put your mind to it.

  • Tom Tom Tommy

    Wowww, What a great advice! So I should stop wasting my $40 on snacks and comfort food for 40 years in order to have $420K. I don’t smoke, drink, gamble but my only vice is eating out because I am a single guy. Although as a heavy coffee drinker, I bring coffee to work at times, I spend a lot at places like Starbucks and DDs.
    I told myself that if I ever become rich, I will never buy grocery. I will have take outs and or have private chef who can cook for me. But looks like, I should not do it for 40 years. After that? Humm, I do not think I will have that luxury with the saving of $420K, either. Therefore, i prefer to spend it now while I am young so I can say I really enjoyed my youth when I am older sitting on a rocking chair.
    My advice is, invest on yourself by getting some knowledge in investment related issues.
    You can do your own investment, early like walthy and spend like wealthy. About to get my Business degree after 5 very difficult and long years while working so many hours a week at a job that paid enough to pay my bills but nothing more. I am grateful for the knowledge I have gained during those 5 years which allowed me already to earn enough to pay my entire college education.