How To Become Rich
How To Become Rich
How Much Do You Need To Be Rich?
When figuring out how to become rich, the first thing we need to do is define what rich is.
Because it is very subjective.
Most of the world lives on $1 a day, so to them, we in the west are rich!
However, I’m sure you don’t want to look at it from that perspective because you want more stuff right…
Well, let’s define it as enough money that we wouldn’t need to worry about any luxury we desire beyond owning private jets and yachts.
Even that may be too broad a definition, and because of the subjectivity of this topic, there are too many variables to hit on a one size fits all description.
If you ask anyone whether they would like to be rich, they’ll say yes, but if you ask them what rich means to them, each of those people will give you a very different answer.
So it’s pretty important to figure out what rich means to you before figuring out how to become rich.
Does it mean traveling full-time first class, staying in 5-star hotels, popping bottles at da club?
Is it being able to spend as much time with your kids as possible and having enough saved up to provide a good life for you and your family.
In the United States, the top one percent of earners bring in $395,000 per year.
But can you use your income to define yourself as rich?
Well in my view, if someone makes $400,000 a year but spends $400,000 through their lavish lifestyle they aren’t rich, maybe a little dumb, but not rich.
So the first step is defining what rich means to you…
This means you need to think about your dream lifestyle.
1. Write down your dream lifestyle and your typical day.
2. From that typical day extrapolate all of the potential costs that would be involved to live that day.
3. Now think about it from a yearly perspective and do a little research to figure out the costs of every aspect of your ideal life.
You should now have a number, a daily amount you need to be bringing in to live your ideal day EVERY DAY.
Let’s use that number to define what rich is, but that’s only part of the equation.
In this next section let’s break down what rich is even further…
What Is Rich
Rich In Time vs. Rich In Money
The stem of that definition spreads out into two sections.
We can be rich in either time or money.
With the ideal in my mind being a combination of both!
But it gets more complicated, because what is being rich in time, not working? What if you enjoy working more than not working?
We need to be careful not to fall too many rabbit holes with this…
Just be aware of the fact that you can be rich in time and rich in money.
A banker on Wall Street is very rich in money, but they are poor in time because they work crazy hours, on average 85 hour weeks according to this study.
I don’t know about you, but I’m certainly not willing to work those kinds of hours, they must love watching numbers go up and down.
On the other end of the spectrum, you have homeless people who are very time rich; they get a whole 24 hours a day of free time! (I understand that not all homeless people don’t work at all, it’s a joke).
But on average homeless people make according to this study $13-$30 per hour.
That’s not bad at all, but not exactly the lifestyle I’m after.
So let’s say the ideal is to work 4 hours per day, five days per week, earning $1000 per week for yourself.
This is about what I did the first three years I was in business.
But of course, that’s just the average we can expect to do if we want to be rich, let’s say we need to work 8 hours per day and earn $10,000 per week just for yourself.
That’s a $520,000 a year salary, which puts you a bit above the rest.
So now that in the previous section we laid out how to define what rich is let’s get into explaining being rich in time.
What I recommend doing is:
1 Write down everything you typically do in a given day and separate them into three columns: Things you: love, neutral, hate.
2 Now that we’ve broken down all of the activities we do in a given week let’s see what we can do more and less of. For the neutral and hate columns figure out whether you can automate them using software or by hiring someone to do it for you (Assume money isn’t an issue)
3 Great, so now we know what things we don’t like or feel neutral towards and have a list of ways to automate them we have begun getting closer to a real plan.
Mindsets Of The Rich
Beyond determining what being rich is to you is in both time and money you need to comprehend the mindsets necessary to get there.
To reach new levels, we need to change our behavior. Otherwise, we would already be there.
And our behaviors are primarily determined by our mindset.
So make it a habit to instill the below mindsets through daily practice.
Investing Vs. Saving
From a young age, we are taught that saving money is the best way to become rich.
Get a good job and save until you’re 65, then you’ll be rich.
But let’s break that down.
If you make 65,000 a year from 25 until 65, you’ve made a total of 2,600,000 in your lifetime.
Let’s assume you were able to save a good portion of that income, 10% because you are terrific at saving (the average person saves much less than 10%).
So you have $260,000…
But this will be of less value every year because overall the interest rate you get from savings is less than inflation.
What our parents teach us from a young age isn’t necessarily true…
Isn’t it more worth it to put in the work of building wealth through your efforts vs. gambling it away in a savings account or the stock market?
The smart thing to do is bet on yourself if you believe you have what it takes to build a real business.
Let’s say that your savings or investments were bringing in 2% interest each year.
What if you could build an online business that brought in even a 10% yearly return.
That would blow any savings you accumulate out of the water.
Internal Locus of Control
Another critical factor in the mindsets of the rich is an internal locus of control.
Internal Locus of Control is the belief that one’s actions will have a direct impact on the expected outcomes of those actions.
So we’re talking about the need for individuals to be independent, free and self-directing.
If you have a high locus of control, you’re more likely to be an entrepreneur, and thus more likely to be rich.
Having an internal locus of control and a high level of self-efficacy accurately predicts whether an individual intends to engage in entrepreneurship.
The idea that individuals have an inherent desire to control their actions and outcomes may play an essential part in entrepreneurial motivation through improving the individual’s belief in their abilities.
Self-efficacy may play an essential part in the individual’s desire to engage in self-employment or organization creation. That decision for freedom over security seems to play a significant role in determining if you’ll be rich.
Self-efficacy is defined as the individual’s belief in their ability to produce desired effects through their actions.
The positive relationship between entrepreneurial intentions and self-efficacy gives credence to the need for an increased focus on self-efficacy in entrepreneurship research.
The idea that individuals have an inherent desire to control their actions and outcomes may play an essential part in entrepreneurial motivation.
Having an internal locus of control and a high sense of self-efficacy both seem to be tapping the same construct.
Both of these factors may directly relate to an individual’s belief in their ability to achieve outcomes through their efforts.
This desire to control actions may have a relationship with the willingness to engage in self-employment or organization creation.
Your belief in your ability to achieve visible results will have a significant impact on what you’re able to achieve.
Our beliefs largely determine our actions, so if you want to be rich, you need to believe that it’s possible.
This is a lot more difficult when you’ve been brought up to believe money is something scarce that should be saved.
It’s much easier to believe in your ability to achieve if you’ve gone through life surrounded by wealth and been told that you can do it too.
The belief in ones’ own ability to achieve specific outcomes is so crucial to external success that there’s a billion dollar ‘self-help’ industry built around instilling this self-belief in others.
Need for Achievement
The need for achievement is a factor of motivation we feel internally, and it can be defined as the level of desire an individual has for a significant accomplishment in their lives.
Those who have a high need for achievement seek out situations in which they have direct control over outcomes and receive feedback for their high behavior.
So because being an entrepreneur entails those above attributes it’s proposed that individuals with a high need for achievement would be more likely to engage in entrepreneurial activities.
A study found that need for achievement significantly determines entrepreneurial potential and thus your likelihood of becoming rich.
On top of that, an individuals likelihood of engaging in entrepreneurial activities increases the higher their need for achievement is.
So this need to achieve is pretty helpful when comparing entrepreneurs and the rich to the general population, so it helps us explain the success and failure in individuals attempts at becoming rich.
It seems that needing achievement leads to individuals starting businesses, and continuing to run them successfully.
So it’s a pretty important factor to consider when we think about the mindsets of the rich, explaining why individuals are internally motivated to achieve things.
Risk Taking Propensity & Self-Efficacy
Risk Taking propensity has also been proposed to be an essential factor in explaining an individual’s decision to engage in entrepreneurial behavior.
If you believe you can achieve something, and you have an intense desire to achieve something, you’ll be much more likely to take the necessary risks to achieve that thing.
Those of us with a high need for achievement are also more comfortable with risk due to the inherent challenge created by ambiguity appealing to both motivations.
Self-efficacy is the individual’s belief in their ability to succeed in certain situations.
Our beliefs in our ability to succeed in specific situations affect our actions in attempting to achieve, so this is especially true when it comes to entrepreneurship and becoming rich.
Our attitudes drive our intentions, and beliefs in how much control over reality we possess, with tolerance for risk significantly predicting an individual’s desire to start their own business.
It seems likely that individuals can deal with the risk of entrepreneurship in their minds because they have a belief in their abilities to be successful in spite of the risk involved.
Tolerance for Ambiguity
It is clear that most intrinsic motivation factors are somewhat intertwined, and the same is true when we discuss tolerance for ambiguity (Pinillos, 2011).
Budner defined it as a personality trait characterized by “the tendency to perceive ambiguous situations as desirable” (1962, P.29).
This ability to tolerate the risk involved with ambiguity is an essential characteristic of the entrepreneur’s motivation due to the ambiguous nature of entrepreneurship (Caliendo, Fossen, & Kritikos, 2011).
However, others have concluded that we do not yet know if traits are an important differentiator between entrepreneurs and non-entrepreneurs (Shane, Locke, & Collins, 2003).
Tolerance for ambiguity is high for individuals in areas that they feel they can achieve desired outcomes.
Like risk-taking propensity and internal locus of control, tolerance for ambiguity can also be combined with self-efficacy.
It seems as though these three factors are intertwined to affect the individual’s level of self-efficacy.
If we want to become wealthy, we need to define what rich means to us first. Then we must look at what rich people do, and how they think. A big part of it is the work ethic of taking action, but behind that is a tonne of mindset concepts such as a need for achievement, locus of control, and tolerance for ambiguity. So by understanding these mindsets, we can work on adopting them while taking action in defining our criteria for becoming rich then backward engineering the process. That’s how we too can become rich.