How do people become rich?

How do people become rich?

People become rich when they live a modest lifestyle and focus on improving their situation. Rich people understand the concept of using their money to acquire assets which makes more money. Become rich by keeping expenses low, creating income, and investing. 

There isn’t a secret to making a lot of money. You just need to make a good income, avoid the temptation to spend, and invest.

Wouldn’t you want $1,000,000 sitting in your investment accounts?

Luckily for you, I’m going to show you how people become rich. Evaluate your situation and be honest if you are on the right path to building wealth. The process of becoming rich is simple, but very few people have the self-control to make it happen.

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How do people become rich?

People become rich when they make a decision to become rich. In order to become rich, you need a focused effort on living a modest lifestyle and improving your finances. Your goal should be to make money and invest, while keeping expenses low.

The hard part about becoming rich is that there are three pieces to the puzzle. You must manage to keep your expenses low, make more money, and invest.

You simply cannot build wealth without doing all three of these items.

Spending too much money is the easiest way to make sure you don’t have any money. Becoming rich is easier when you make $100,000 vs $40,000, but income means nothing if you spend it. 

High-income earners will always have the upper hand. However, people with high incomes tend to have lifestyle inflation which keeps them poor.

Additionally, you can’t build wealth unless you find a way to have your money make money. Investing is a crucial piece of the puzzle, so one day your passive income makes more than your day job.

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Live a modest lifestyle

Living a modest lifestyle is the number one reason why most individuals don’t become wealthy. Most individuals would much rather spend their money on fancy cars, boats, or a large house. As a society, we have become consumers and it’s keeping you broke.

There’s nothing wrong with buying something or treating yourself. However, society as a whole has prioritized stuff over their freedom.

Most individuals get a pay raise and go out and buy a new TV. If you get a bonus, you are probably spending that money on something fun.

Rich people have understood what it is like to be content with their own life. They don’t need stuff to make them happy.

However, it’s obvious that rich people do own items and even some luxury items. The difference is most rich people didn’t buy these things when they were trying to get rich. Rich people tend to buy fun expensive toys with their cash flow.

Therefore, the secret to building wealth is to stay poor until your investments can pay for the lifestyle you want.

Do not use your 9-5 income to buy yourself luxuries. Instead, live like you are poor and invest your income.

Always be self improving

Millionaires understand that self-improvement is key to their self growth and financial growth. Typically, millionaires are passionate about learning and constantly want to know how the world works. Rich people have a childlike curiosity and are always learning.

Most individuals stop learning the minute they leave the classroom. Once they’re done with school, they have landed their job and their situation stays the same.

The more you learn, the more you earn.

Millionaires are always trying to find new money making skills. Making money is simply as easy as learning a skill and applying it in a way to make money.

For example, you could learn more about real estate and the tax advantages. There are thousands of books available to learn about real estate. A millionaire might be constantly reading about real estate if they were looking to invest in real estate.

You might also want to learn about search engine optimization in order to grow websites. Once you have learned about SEO, earning money becomes as simple as repeating one task.

But how does learning a new skill make you money?

The person that learns about real estate might decide they want to purchase real estate. Over the course of 5 to 10 years, they might own multiple properties. Each of those properties are now earning them a full-time income.

The person that learned about growing website traffic through a search engine optimization, now owns websites. Each of these websites earn them a full time income.

Without taking learning into your own hands, you don’t learn a new money-making skill. Your life stays the exact same.

Make investing a priority

Investing is the number one priority to rich people. In order to make money, you have to learn how to multiply your own money. It is much easier to multiply money than it is to earn money.

Look at it this way. Your job might pay you $50,000 per year. On your salary, you might only be able to invest $10,000 per year.

However, what happens when you get $100,000 invested in an index fund like the S&P 500?

Traditionally, the S&P 500 has returned 10% annualized returns. Therefore, your $100,000 investment is now earning you $10,000 per year.

Your Investments are able to contribute just as much as you can. When you reach $200,000, your total return on investment is $20,000 per year. You are now contributing $30,000 every year towards building wealth.

The more money you throw into investments, the bigger the impact of your returns. Compounding interest is an amazing thing. If you are earning 10% on a million-dollar portfolio, then you are earning $100,000 in returns!

Getting your first $100,000 is the hardest thing to do when it comes to investing. Afterwards, your Investments are to do the heavy lifting.

Acquire assets

Remember when you used to play Monopoly as a kid? The entire point of the game is to acquire as many assets as possible to become the wealthiest person.

Real life is no different. You want as many assets as possible to generate the most amount of income for you. Your goal is to have other people pay you more than you are paying them.

I’m sure most of you aren’t wanting to rush out and buy a hotel. However, there are plenty of other assets you can accumulate in order to build wealth.

 For example, you can build or buy any of the following assets:

Remember, when you first start playing a game of monopoly, you don’t earn much. It takes time, money, and effort to build your assets up to a substantial cash flow.

Focus on income growth

Rich people understand the importance of focusing on income growth. You can cut back expenses, but eventually you will have a limit as to how much you can cut. At some point, you need to focus on growing your income.

A lot of wealthy people look for jobs or side hustles where pay is not determined by time. Instead, rich people are looking for pay-for-performance jobs.

I could sit in an office chair at a 9 to 5 job and I would only make my hourly rate. There is no incentive for working hard, smart, or at all really. At the end of the day, I’m just getting paid to show up.

Pay-for-performance jobs set your income to a whole nother level. You have no cap on how much you can earn, but earn based on how well you do.

For example, you might be a realtor. If you don’t sell a house this month, you better figure out where your next meal is coming from. However, be outstanding and sell 20 houses in a month and you’re going to have deep pockets.

The more money you make, the more money that you should have available to invest.

Stay married

The most expensive thing anybody can do is get a divorce. You could have a one million dollar portfolio, get divorced, and end up with a $500,000 portfolio.

If you’re not married yet, choose your spouse wisely. If you happen to be married, work on your relationship and stay happy if you want to protect your wealth.

Build income streams

Millionaires also understand the importance of building multiple streams of income. The more income streams you have, the more diversify your portfolio. In addition, the more income streams you have, the more income you earn.

Most people rely on a 9 to 5 job which pays the bills. However, every single one of us is subject to a layoff. There are forces outside of our control that could impact our income.

Having a second income source is great in case you get laid off. You don’t have to dip into your savings and you’re still earning money.

However, if you have both a nine-to-five job and a second source of income then you earn a lot of money. You can use that extra money to invest and build more money.

An example of building an income stream might be a side hustle. Starting something outside of your nine-to-five job is a good way to build income. You can then take that income and invest it into a dividend paying stock.

Now you have three sources of income, a job, a side hustle, and dividend paying stocks. You are more diversified and getting paid three different ways.

What is the most common way to become a millionaire?

The most common way to become a millionaire is through investing. most individuals are not going to start the next Facebook or Apple. Instead, most millionaires are made by living a modest lifestyle, getting a high-income, and investing.

Most millionaires tend to be business owners. When you are a business owner, you have more control over how much money you earn.

You can become a millionaire with a regular paying job, but it just takes longer. When you own a business, you can be making a higher salary.

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Summary: How do people become rich?

As you can see, most people become rich simply through investing. However, the more you can invest the easier it will be to become rich. Therefore, you must also focus on reducing your expenses and growing your income. 

Investing and acquiring assets is a must to become rich. The more income streams you have, the easier it will be.

Most rich people are always looking for self improvement. Have the curiosity to explore the world and learn more about it. Look for opportunities to build wealth as you grow and gain knowledge.

Choose your spouse carefully or treat your current spouse well. Your relationship is one of the biggest factors when it comes to building wealth.

John is the founder of TightFist Finance and an expert in the field of personal finance. John has studied personal finance for over 10 years and has used his knowledge to pay down debt, grow his investment portfolio, and launch a financial based business. He is committed to sharing content related to personal finance based on his experience in his career, investing, and path towards reaching financial independence.