WHY ARE SOME PEOPLE RICH?

or let's just say: How do people get “RICH”?

It’s a question I get to receive most times. Getting Rich is about making the right decision and that boils down to the matter of choice.

Many seem to assume that it’s impossible for the average person to get rich without an obscene amount of luck. Others seem to believe it takes wealth to become wealthier (which is sort of true, but not entirely). Still others attribute it to hard work, more than the average person is willing to produce, and to smart work (which is absolutely true).

The truth is that the elements of building significant wealth – enough to live out the rest of your life – are in the hands of every person, but they require a number of ingredients. You need hard work. You need smart work. You need self control. You need patience and time. You need to be responsible for your own choices, good or bad. You need to accept your own faults and the challenges of your current situation, and make good use of any situation you find yourself in.

Those ingredients form the bedrock for almost every method used to create wealth. Here’s exactly how wealth is created by almost everyone who doesn’t inherit it.

#1: Cut personal spending and control lifestyle inflation.

Most people are living from hand to mouth, which means that they’re spending every dime they bring in. All that a person has to do from that point is to simply cut back on their spending so that they’re spending less than they earn and have some left over with which to build wealth.

You need to spend less than you earn. I know money is meant to be spent but that is the absolute key to success.  As long as you’re spending less than you’re bringing in, your finances are going to head in the right direction.

You can get rid of debts, start investing, and build wealth with the money saved.

#2: Work hard to maximize personal income.

How do you do that? You can focus on your current career, for starters. Make it a personal goal to become a top performer at your job and move up the career ladder. Don’t just look at your job as “hours for money” unless your current job is not your primary focus for earning income. If it is – give it your focus and give it your all.

At the same time, dabbling in entrepreneurship in your spare hours can end up paying some incredible dividends, too. A side business can earn a lot of money and can, on occasion, wind up supplanting your main job and earn you more than you ever dreamed.

#3: Eliminate high-interest debt.

The absolute first thing anyone should do with their leftover money (see the first two points if you’re unsure about this idea) is to use it to eliminate their high-interest debt.

Credit cards fall into this category. Payday loans definitely fall into this category. Some student loans and, occasionally, car loans fall into this category.

Debts with a high interest rate devour your money. You’re essentially handing money to them for virtually nothing in return except for the “benefit” of buying things a bit sooner than you could actually afford them.

How do you do this? I usually suggest that people follow what I call the “debt fireball” – make minimum payments on all of your debts, then throw the biggest possible extra payment you can at whatever debt has the highest interest rate. Soon, that one will be toast, and you can move on to the next debt down the list. Keep repeating this until you’ve toasted all of your debts.

When you’ve done that, you’ll suddenly have a ton of money available to invest each month.

#4: Take advantage of free money.

Don’t just spend every free money you get. I mean, the money you did not work for, Keep them!

Sometimes, life will dump some money in your lap. An older relative dies. You win a prize of some kind. You find an opportunity to flip an item quickly for a big unexpected profit.

Whatever it is, you suddenly find yourself with a nice amount of unexpected money on your hands… and it can be very tempting to spend it on something fun.

Don’t. Treat it just like you would any other income that’s above and beyond your spending level.

Use it for your debt fireball. Use it to invest. Use it to accelerate your journey toward owning a rental property. Use it as a way to take a bunch of steps at once toward your long journey to wealth.

Free money is a great thing, but they can easily be wasted. Don’t let that happen. If free money comes along, use it smartly.

#5: Invest in yourself.

Another option for investing that I briefly touched on earlier is the idea of investing in yourself. If you’re spending less than you earn, you can take some of that money and improve yourself in various ways, particularly ways that have the potential to increase income in the future.

You can use that money to earn a better college degree or job certifications. You can use that money to pay for coaching or lessons to help you master a new skill or shore up an area in your life in which you’re weak. You can use it to fix cosmetic concerns with orthodontic equipment or plastic surgery, to give you more confidence.

The goal of all of these things is not only to improve your personal confidence and skills, but to use those newfound elements to improve your professional income, which you can then use to build your wealth even faster.

Final Thoughts

Spend less than you earn – and avoid lifestyle inflation even as your income goes up.

If you manage to do that one thing – and it’s the one thing that the most people fail at – then you’re going to be all right when it comes to your financial future.

Good luck!

You can also give us more ideas as well.