Wealth Creation: Three Paths to Becoming Rich

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Despite all of the information and advice out there on becoming rich there are only three known ways to accumulate wealth:
#1    Living Below Your Means
#2    Expanding Your Means or
#3    Following Both #1 and #2

Living Below Your Means
I like to refer to this as the 80/20 Rule. It’s a simple rule really and I consider it a Rich Habit.  The 80/20 Rule requires that you live off of 80% of your Net Pay and save the remaining 20%. If you get a raise or bonus save 20% of that raise or bonus in addition to the 20% on your regular Net Pay. By living off 80% of your Net Pay you are forcing youself to live below your means. For most, if you stick to this rule for 25 years you will be able to retire and not have to worry about finances in your retirement. Conservatively investing this 20% takes advantage of the power of compounding and the value of your savings will grow significantly over time.

When it comes to spending this 80% here’s some advice:

  1. Don’t spend more than 25% of your monthly net pay on housing. It doesn’t matter if you own or rent. Stick to this 25% rule.
  2. Don’t spend more than 10% of your monthly net pay on entertainment. This includes movies, restaurants, bars etc.
  3. Don’t spend more than 5% of your monthly net pay on auto loans and never lease. Leasing is a Poverty Habit. Buy your cars and take good care of them.
  4. Stay away from accumulating credit card debt. If you are doing this it means you are living beyond your means and you need to cut back on something.
  5. Always invest your savings prudently. Never gamble your savings on get rich quick schemes. There’s no such thing. The power of compounding can grow your savings and make you wealthy. Saving just $250 a month over 40 years will produce $500,362 at a 5% return.
  6. Max out your contributions to the company retirement plan. If the company matches your contributions, great. That’s free money. Always take free money when you can get it.
  7. Know what you spend every month. Create a monthly budget and track what you spend.

Most of the wealthy don’t make a lot of money. But they do save a lot of money. They make a habit of saving until it hurts. Focus on accumulating wealth and if you get a big pay day, great. It’s icing on the cake. If you stick to the 80/20 Rule you will save a lot of money and you will be wealthy long before you reach retirement age. You will be one of the few among your friends and colleagues because, unfortunately, most parents don’t teach their kids the importance of saving, so nobody saves. Accumulating wealth is not about hitting it out of the park. It’s about getting singles. You get enough singles and you win the game.

 

Expanding Your Means
This path often involves taking on some risk. It may require investing your hard earned money on a business or  real estate investment. The risk is often both in time and money. Many proponents of this alternative to wealth creation, like famed author Robert Kiyosaki, do not subscribe to the 80/20 Rule. If fact, they debase the notion of living below your means every chance they get. They believe in saving and then taking risks with the savings in order to make money. They are not afraid of risk. Sometimes they win and sometimes they lose.

But expanding your means does not always involve taking on risk. You could expand your means by taking on a second job, writing a book, Internet sales, multi-level marketing, or starting a part-time business whose only real investment is time.


Applying Both Strategies

If you apply both the 80/20 Rule and the Expand Your Means strategy you will accelerate wealth creation significantly. Expanding your means and the 80/20 Rule are formidable strategies used by many wealthy individuals to accumulate wealth that allows them to retire without any financial worries.

 

About Tom Corley

Tom Corley understands the difference between being rich and poor… At age 9 his family went from being multi-millionaires to poor in just one night.

Tom spent five years studying the daily activities of 233 wealthy people and 128 people living in poverty. Tom discovered there are vast differences in the daily habits of the two groups. During his research he identified 149 daily activities that separated the “haves” from the “have nots.” The culmination of his research can be found in his #1 Bestselling book, Rich Habits – The Daily Success Habits of Wealthy Individuals (www.richhabits.net). Tom is a CPA, CFP and holds a Master’s Degree in Taxation and is President of Cerefice and Company, CPAs and CEO of the Rich Habits Institute.

Tom has shared his insights on The Dave Ramsey Show, WABC, WCCO, KOA, KDKA, and KKOB and more than 1,000 other radio stations, a host of print media publications and many TV shows including Financially Fit’s Farnoosh Torabi (Today Show, Kelly and Michael, The View).

Tom’s number is 732-382-3800 Ext 103.  Email: TOM@RICHHABITS.NET   Media Kit: http://richhabits.net/rich-habits-buzz-media-kit/

 

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Thomas C. Corley About Thomas C. Corley

Tom Corley is a bestselling author, speaker, and media contributor for Business Insider, CNBC and a few other national media outlets.

His Rich Habits research has been read, viewed or heard by over 50 million people in 25 countries around the world.

Besides being an author, Tom is also a CPA, CFP, holds a master’s degree in taxation and is President of Cerefice and Company, a CPA firm in New Jersey.
 
Phone Number: 732-382-3800 Ext. 103.
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