How can middle class people become rich?

NEGI RK Sunday, August 22, 2021

This magical principle even works for the poor and the rich alike. As long as you spend less than what you make, then you are getting rich.

If you make 100 dollar, then don't spend 100 dollar. Spend 50 on everything, 20 on emergency, and 30 on saving/investment. Don't take any debt or if you do, make sure that it doesn't exceed 10 dollar which mean reducing your emergency fund.

This principle will get you rich. Not tomorrow, but by the time you need to retire 30 or 40 years later.

Sure it's fun to spend all that you make + debt that you only need to pay next month. But guess what? That will actually make you poor rather than rich.

Being rich is not a sprint. But a marathon.

Well, some people will ask you to work smart. But basically, you need to work hard and smart and relentlessly till you reach where you want to be.

Never shy away from hard work and stay loyal to your dreams. In this era where any smart phone is usually flooded with innumerable applications basically the one that allows you to socialize and make new friends, it is really easy to get distracted from your goals. Avoid those as much as possible.

Keep your goals secretive. Keep your friend circle healthy and small. Avoid pessimism in any way.

Be disciplined. Be consistent. Take breaks. Stay charged but don't be too harsh on yourself.

I suggest you read,” The Millionaire Next Door.” Also read,” The Richest man in Babylon’. Both suggest the 30/70 rule which basically states that you live on 70% of your take home income and invest the remaining thirty percent 3 ways. Ten percent to charity, ten percent in passive investment and ten percent for self improvement. Other suggestions are own your business and avoid expensive consumer items. In the Millionaire Next Door the author stresses that all his interviewees committed to be prodigious accumulators of wealth.

You would be a successful human and wealth and prosperity would follow.

Most of the richest people in the world came from working and middle-class backgrounds.

Only in some places where inherited wealth dominated, like some parts of Europe, is it 50%-50%.

If you mean is it possible to get rich, or wealthy, on a middle-class income, then the simple answer is yes.

This man was a UPS driver for years. He made a maximum of $14,000-$15,000 a year:

Theodore Johnson died with $70million, after a friend told him about investing, which is why he got into it.

Yes, you read that right. $70million. Now sure, when he started investing, 14k-15k a year was worth 50k-75k in today’s standards.

Yet it still wasn’t a huge salary. So, how did he manage it? Well, he invested very smart, long-term.

He wanted to make a difference when he died, so he gave it to charity.

He isn’t alone. This man was a janitor called Ronald Read who accumulated $8million:

This lady was a secretary and accumulated $6m-$8m:

You might think these are one-offs. However, stats show that 14% of the world’s millionaires are teachers, and about 50% are middle-income professionals.

The reason is simple. Income doesn’t always rise exponentially with time. Wealth can.

Buffett was once asked why he was so rich. He said three reasons:

Being born in America at the time he was, which gave him business opportunities.
Good genes. So, he has lived a long, healthy life.
Compounded returns, which have been aided by those compounded returns.

He didn’t make his first billion until he was about 55. Now he has $100 billion.

He would have had more if he hadn’t given so much to charities since the mid-2000s, when he started to donate to the Gates Foundation.

Same with many of these people above. Plenty of them probably only had $1m at say 60, but the extra time allowed them to accumulate more.

So, leveraging time is one way to get wealthy, although not the only way.

Another way is to leverage tax advantages you might have, for example if you become an expat.

As a final comment I will speak about risk, as it is the most misunderstood subject.

Do you assume that you are playing it safe with money in the bank.

You are fooling yourself 👉🏼 and here is exactly why:

1. If you save money in the bank as, you're buying into the sure risk of inflation.

3. If you only rely on your savings for retirement, you're risking everything on the assumption that thins will go to to plan.

But life doesn’t always go to plan. Some sort of risk is inevitable, it's everywhere.

It is far better to: