If you ask most people, they will probably tell you they’d like to be rich. Live where you want, vacation anytime, never have to worry about making the rent — who wouldn’t want that life? But even though most people say that’s what they want, not everyone does something about it. If you really want to get rich, here are eight ways to go about it.
1. Start Early
No matter what path you take to riches, the sooner you start, the sooner you’ll get there. And you’ll have more time to build that fortune, and then enjoy it. So don’t wait — start now.
According to Vanguard, if you save $1 at age 20, that dollar will be worth $5.84 when you turn 65, assuming an annual return of 4%. If you wait until you’re 55, you’re looking at just $1.48 at age 65. Put another way, if you save just $4,500 per year over 45 years, you’d have over $1 million at age 65.
2. Pay Yourself First
Make saving money your top priority. It doesn’t matter if it’s $10 a week, but start somewhere and save regularly. Once you’ve put away your savings, budget the rest for your living expenses. Saving comes first.
When you get a bonus or a raise, add that money to your savings instead of blowing it on something you won’t remember in a week. Increase the amount you save as often as you can.
3. Live Below Your Means
If you want to end up rich, you can’t start out by trying to keep up with the Joneses. Trying to have the latest and greatest of everything usually means you have to borrow money, and that’s a wealth killer. Pay cash whenever you can, and if you can’t, think long and hard about how much you want to borrow.
4. Invest, but Only What You Can Afford To Lose
Once you’ve amassed some savings, it’s time to put your money to work. Investing in stocks or mutual funds historically produces higher returns than putting your money in a bank, but there is risk. Make sure that the money you’re investing is not money you will need to cover your living expenses.
Once you start to build a portfolio, make sure it includes a healthy mix of asset types. If you have all your money in tech stocks, for example, you could take a big hit if that sector goes south. The more time you have before you plan to spend the money you’ve invested, the more risk you can take because you’ll have time to wait out the market if there’s a downturn.
5. Invest Regularly
Just like you did when you were saving money, you’ll want to put money into your investment account regularly. Not only does this build good habits, but if you continue to invest on a regular basis, you could end up spending less per share, using a method called dollar-cost averaging.
Dollar-cost averaging means you invest your money in equal amounts at regular intervals, no matter what the market is doing. Since you’re spending the same amount each time, you are buying fewer shares when the price is high, and more shares when the price is low. This method insulates you against the temptation of trying to time the market.
6. Start a Side Hustle
Saving and investing are important when you’re trying to build long-term wealth, but generating extra income is also a good strategy. If you work at a full-time job, you may be able to start a business on the side that will bring in some extra money, which you can then save or invest.
Your side hustle could be in a similar industry to the one you’re employed in, but be sure you’re not competing with your employer. Or, you could start a business in a completely different area. Starting a side hustle in an industry you’re passionate about will make it seem less like work and more like fun.
Once you’ve gotten your side hustle up and running, you could quit your day job and do the side hustle full time, in which case your earnings could be virtually unlimited. Or you could sell your side hustle business for a profit. Either way, building that extra business on the side is a good way to build wealth.
7. Work for a Startup
If you have the opportunity to go to work for a small but growing company, seriously consider it. Your salary might be lower than it would be at a larger company, so startups may sweeten the pot with stock options for those who get in on the ground floor.
Here’s how that works: Employee stock options give the employee the right to buy a certain number of shares of company stock at a certain price. In order for stock options to be attractive, the price at which an employee can buy the shares must be less than the market price. If the company is private, your ability to trade those shares might be limited. But if the company goes public, you could be sitting on a gold mine. And you don’t have to actually buy the shares until you’re ready.
For example, if you get a job at XYZ Tech, a small startup, it might give you employee stock options for 1,000 shares of stock at $10 per share. While the company is still privately held, you can just hold on to your options. But if the company goes public, the shares may trade at $50 per share — or more. When that happens, you can exercise your option and buy 1,000 shares for $10,000. Those shares are now worth $50,000, and you can turn right around and sell them, pocketing $40,000 in profit.
8. Buy and Sell Real Estate
There are a lot of ways to make money in real estate. You can buy properties, fix them up, and sell them. You can buy land and build new houses, apartments, or commercial buildings. Or you can buy multiunit properties and rent them out. You may need to borrow money to buy the property in the first place, so be sure you’re able to cover the debt on your loans and still make a profit.
If getting rich were easy, everyone would do it. It takes some hard work and some sacrifice, but once you get there, you’ll probably say it was worth it.