“Get Rich Slowly” is not just a name of a highly recognized personal finance blog, but is also a financial battlecry for a lot of financial bloggers and PF (personal finance) heads. It’s such a mantra that I thought it would be a great idea to write a series focused on wealth building, but I’d like to give it a bit of a different spin since I’ve already covered some of this ground through posts like these:
- Top 10 Wealth Building Ways Of Ordinary People
- How Are You Building Your Net Worth?
- Become A Millionaire In 10 Steps Flat
In the world of personal finance, a lot of choices we make are tailored to our lifestyles, age and profile, and so much of the guidelines can be subject to interpretation. I realize that financial advice is just a blueprint that many readers can act upon differently, depending on where they’re coming from. Let’s take for instance the general advice that tells us to “put our money to work.” What does this mean to you? For a lot of us out there, does this mean taking the money we have and applying it to any of the following activities?
- “Invest” it in lottery tickets.
- Create a portfolio of individual stocks based on their relative strength.
- Leverage with options, margins and little or no money down.
- Buy real estate, then flip it or rent it out.
- Lend money and collect the interest.
- Start a business with our savings.
Each one of these approaches has made someone out there very rich, so it’s natural to expect that there will be people who will swear by each method as their proven and definitive way to wealth. But what we need to remember — but many choose to ignore — is the fact that what works for the select few may not apply to the general populace.
Money making schemes are a dime a dozen. And though there are an infinite number of ways to make money, most of them don’t work too well. Some won’t get you very far (or may even derail you: e.g. playing the lottery) while others will give you a much better chance of building a solid nest egg and growing your net worth.
Can you tell which of these ways can spell trouble and which can propel you further ahead?
In the weeks ahead, I’d like to make that distinction by touching a little on the world of “get rich quick” and contrasting that to what it means to “build your wealth slowly”. I’ll be tackling these questions and issues:
- Would you fall for a get rich quick scheme?
- What “making money fast” really entails.
- How to build wealth slowly (yeah, many of us bloggers love this topic to death).
I’m also not claiming that you can’t make insane amounts of money by going down certain roads, because you can certainly do that — but what are your odds? If you want to increase your chances of doing well, then you may want to take note of the things that DO WORK for most people vs the things that BLOW UP in most people’s faces, while enriching a select few.
Really, why not ask ourselves this interesting question, which I feel sums up this topic well:
Which would you rather take: a 5% chance of making $1 million in one year with 95% chance of going deeper in debt, or a 90% chance of making $1 million in 20 years?
Image Credit: Mindy Harris
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I would always rather 90% chance of making $1 million in 20 years…always
However we live in a culture “spend it and spend it now” and savings sometime takes the backburner. Hence, this is why most live paycheck to paycheck
It can be frustrating to be patient. I don’t like it…I mean, I can figure out how we’re going to do stuff, but I have to act day by day in paying off debt.
But I also don’t like taking chances. I really really don’t like risking my money. It’s not like I have enough to risk it more than I have to. Not investing would be a sure loss, however, what with inflation.
P.S. Love the turtles!! You always have the best pics.
The power of compound interest is astounding. The way to get rich is simple: 1. Save money, 2. Compound, 3. Wait 20 years. It’s the new math.
Risk/Reward is important too. Over the course of 20 years a 1% change can be thousands of dollars more. But balancing that risk/reward is key. For example I would risk $1 on a 500/1 payout ($500) if the risk was much less then that, say 10/1. However at 1000/1 I wouldn’t because the risk well outweighs the benefit.
Anybody can be rich! As long as you have the patience and determination I guess anything is possible… And also you don’t have to be afraid to take the risk. At first it may be risky but in the end it’s rewarding..
The problem is that your 1M$ won’t worth much in 20 years
I guess it would be safe to aim 3M$ in 20 years
SVB, do you think it is the right time to buy properties in the US or is it going to continue to drop?
The Financial Blogger,
You are absolutely right about the erosion of money after 20 years. But it’s still good. It’s still worth $500,000 – $600,000 even with 3% inflation a year running for 2 decades! Better that than going further into debt….!
Regarding the property markets — I think it will take another couple of years to bottom. The behavior of real estate is that after it bottoms, it also takes a while to plateau before it rises again. So I won’t be in any hurry. Here is a post I wrote on this subject not too long ago. I discuss “timing” real estate investments to some degree.
Hi there,
I think its good to have the attitude that wealth is accumulated over a longer period of time. And the effects of compounding can be amazing in building wealth.
I cover a post in my blog about how wonderful compounding is. It really is a magical thing!
Anyways despite being able to accept that building wealth over a period of time is good, one should not also miss out on opportunities for creating wealth today as well.
Its not really the case of one or the other. I think that you can do both.
Of course you have to pick your investments wisely. But its also wrong to say earn money today or earn money in the future.
Young Investor
http://www.investmentrealty.blogspot.com
I would risk the 5% for a quick return if I “felt” the investment. Of course, research is ALWAYS the key to any successful investment. Do your homework. If it still feels like there is a possibility of hitting a golden bulls eye then go for it. Just never risk (invest) money that you cannot afford to lose. Investing is gambling, there is no other way to put it. The reality is that you have to balance the risk and investment with the potential payoff. Some truly stupid ideas have made millionaires out of some lucky people.