Derek’s 5 Tips to Becoming Wealthy

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“Why in the world are you worried about paying an extra $10 a month on your cell phone bill? My wife and I pay over $200 a month. That’s just the way it is.” — a coworker that will remain nameless

I wasn’t fully prepared to respond to this questioning at the time. To me, saving money just seemed logical. If I save $10 a month on my cell phone bill, that means I could spend (or more likely, invest) that money somewhere else. Why pay more than I have to? I soon realized that I was either one of the few logical people at work, or was cheap and worried to much about money.

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After putting a little more thought into the question of “why look for savings?”, I realized that this was just one of the pieces to becoming wealthy. Throughout the past four years, I have been continuously learning and writing about “life and my finances”. During this journey, I have discovered 5 tips to becoming wealthy. Follow these tips and you should soon find yourself in a position of wealth too.

1) Ignore those around you

To sum it up, pretty much everyone around you is a financial idiot. They all talk as if they are personal finance experts, but they are not. My number one rule in life is to ignore the financial “wisdom” of co-workers, friends, and neighbors. Many of them are surviving on credit and will never be rich.

Instead, open up a book written by Warren Buffett, Jim Rohn, or Dave Ramsey. These individuals have amassed millions of dollars and have made many friends along the way. Learn their life lessons and follow their success path. Do NOT listen to your broke friends.

2)  Ditch the Debt

So many people have heard that taking on debt is smart and sophisticated, but there are very few instances where taking on debt is actually a wise thing to do. If you are making payments on anything that is not paying you back money each month, then you are not taking on the right kind of debt.

In order to get wealthy, I would suggest that you live frugally and use your extra cash to pay off your credit cards, student loans, your car loan, and yes even your mortgage. Your house is not putting money in your pocket, so even the low interest rate of 4% is still not wise. Get out of debt completely and then you can really start to amass your wealth.

building wealth3) Work harder and smarter than anyone else

How many hours do you work each week? 40 hours? 50 hours? If you are working less than 50 hours a week at your day job, then you have many extra hours to develop additional income (which can of course help you pay off your debt). If you increase your income wisely, then you should soon be able to work less and earn more (via passive income). If you put in the extra hours now, you can not only amass wealth, but you can almost certainly retire early as well.

4) Know what success means to you

Success is a subjective term. Perhaps you have a family and would love to spend more time with them. Success for you would be to escape work for a few more hours a week to have family time. If you are single, maybe you want to earn as much as you can as fast as you can. And, if you just want to do whatever you want, then perhaps success would mean an extreme early retirement by living frugally.

Define what success means for you, and then you can race toward that goal with your actions in the present.

5) Reinvest your profits

If you truly want to be wealthy, one of the most important steps is to reinvest your profits back into your business/investments. By reinvesting your profits (instead of using the money for your entertainment), you will exponentially increase your savings year after year.

I have been reinvesting my earnings and dividends over the course of four years and already I have seen an exponential increase in my account. In another five or six years, this investment fund is going to start growing at a crazy rate.

Reinvest your profits and you will see the benefit as well. In a short time, you will consider yourself severely wealthy.

Do you have any more tips on becoming wealthy?

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22 comments to Derek’s 5 Tips to Becoming Wealthy

  • Anthony

    Thanks for sharing Derek. I especially appreciate the point on “Ignoring Those Around You”. Chances are, if you are broke, those around you are broke too. I recently met a gentleman in the line at the bank, and was sharing this very thought. He was a little more than intrigued to learn that it is very likely that his income is the average income of his closest friends. He immediately said that he had to find new friends! Such is the power of knowledge. Again, thanks for sharing.

    Anthony
    Anthony recently posted..2 Simple Ways to Get Quality Leads for Your Online Business

    • It’s not always easy to find those new friends, especially since it likely means ignoring your old friends, but if you would like to grow more wealthy then it’s essential to surround yourself with people that have the same mentality. If you are hanging around with poor friends, they are probably talking about how the government is screwing them over. If you have rich friends, they aren’t reminiscing about old excuses – they are thinking of how to be smarter than the government and continue to earn money more money than the previous year.

  • Sadly, that co-worker will never be wealthy. When you just go with the flow and accept what you are being charged, you will never be wealthy. You can’t be that lazy with your money. I always ask for a discount and many times I get it. The 5%-10% adds up over time.
    Jon @ Penny Thots recently posted..Retirement Is All About You

    • It’s true. My co-worker will likely always drive a nice car and will live in a large home, but he will never be wealthy. He does not yet understand why I live and spend the way that I do, but perhaps when we’re older he will catch on. If not, then I hope he really enjoys his cars…

  • Number 1 is so on point! Debt has become normal so yes — ignore those around you! My hubby was recently impressed with some furniture at a mutual friend’s house until I told him everything was from Rent-A-Center and they would be paying for it for the next 20 years. Suddenly it wasn’t attractive any more.
    MomCents recently posted..Articles that Make “Cents” – Roundup #3

    • Is everyone so insecure about themselves that they feel the need to go into debt just to impress others? Either people have gotten extremely greedy or are way too worried about what others think about them. Crazy.

  • I’m still trying to figure out how to work “smarter” but every year we get closer 🙂 Gets even trickier when you’re always building and trying out new things as an entrepreneur. Things will either explode for the good making it all more than worth it, or crash and burn and leave you shaking your head, haha… at least you’re left with some lessons learned to take away though 🙂

    • Yeah, it does sound like you’re often pretty busy working on new things, but that’s really where you have to start. There’s no way of knowing what idea is going to be genius and which one is going to flop. But, you always have to keep the end in mind. If one of your ideas takes off, will it involve you working 80 hours a week or can you systematize the work and earn the extra money with hardly any extra effort at all? You don’t want to create a job for yourself. You want to create a business that can function on its own.

  • Tennille

    I think these are all great tips! We are huge Dave Ramsey fans in our house and have stopped listening to the advice from “broke people”. It can be hard to do but it is well worth it!
    Tennille recently posted..I Joined The Yakezie Challenge!

    • It is amazing how many people want to give stupid advice. I already have a net worth that is many times more than the average person my age, which means there is absolutely no reason to change course now!

  • I agree with the responses above. Your rule #1, well, rules! That’s why it’s so important for us to have posts such as these to read to remind ourselves we’re not the only ones thinking that way.

    At first it’s hard not to listen, but as our motivation for independence grows stronger than the worry of what other people think (aka moving from extrinsic to intrinsic motivators), it becomes easier or, even better, a non-issue.

    • Great comment FTP! It isn’t always easy to ignore those around you, but as you get rid of those debts and start to save up money at an alarming rate, you begin to wonder why everyone around you constantly puts themselves into money trouble! I mean, that new car, the boat, the expensive vacations – they just aren’t necessary and they will keep you poor for the rest of your life!

  • Laurie P.

    This may be the #1 best piece of advice I’ve ever seen…ignore all those around you, especially the proclaimed finance people! Learned this lesson the hard way when we got married and sought out a “financial adviser” who convinced us to buy whole life insurance and some kind of IRA which was not in our best interest. Thankfully, within a year, we came to our senses and got out of that, and I came to believe that NO ONE will care for, respect and honor me OR MY MONEY more than I will! Great advice! Thanks for the reminder!

    • It seems that everyone is liking this advice. It is incredibly important though! If you go with the flow and act like those around you (financially), you will never get anywhere! Sure, you’ll have some stuff, but you won’t ever be financially independent, and you certainly won’t grow wealthy. That’s too bad that your financial adviser did not have your interests at heart, but I’m glad that you learned from it early! Keep up the good work Laurie!

  • These are all great tips. I can’t say that I’ve always followed them, but I’m getting there!
    Amy recently posted..School Shopping First-Timer

    • They aren’t always easy to follow, but they are essential for wealth! Keep working at it and you will soon find yourself in a strong wealth position! 🙂 Thanks for the comment Amy.

  • I love #1! We are often influenced by those around us. Especially if they are attempting to live a life of luxury (trips, cars, concerts) but everyone has different philosophies on how to live their lives, thinking about the now tends to consume the hunger to fit in and “live it up”.

    • Haha. Everyone is loving #1! Since most do think about living in the moment, their financial success seems to suffer. If you try to match them, your financial situation will suffer as well. Live not for the moment, but for 30 years from now if you want to be wealthy later in life.

  • clement sadjere

    Amazing tips i must confess. Thanks Derek for sharing these awesome secrets

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