How can anyone become rich?

In 2014, Harvard University conducted a study that proved money can buy you happiness. Not quite happiness, but the experiences that provide it.

We cannot deny that, unfortunately, without money, life is more difficult. People cannot focus on things that really matter. Because of money families break up, people die and the world collapses. To my mind, it is the first problem that any person in his life should solve. Creative people don’t have to worry about others enjoying their work if they don’t have to worry about making money. Life is designed to be lived.

You got the idea.

I strongly stand by the fact that anyone can become rich, or, being more precise – financially independent, provided that they are correctly prioritized. You don’t need a college degree in finance or economics to ensure stress-free life for you and your family.

All that is needed is a little effort, willpower, and this article.

Main difference

The book “Rich Dad, Poor Dad*” exquisitely explains the main difference between a rich and a poor person. Everything depends on how you handle the money.

Money is just a tool, everything depends on how you can use it.

If the goal is to become a millionaire then you don’t need to create a new Facebook or Amazon, you just have to invest. Rich people are getting richer inevitably because they own properties, shares, bonds, etc. They “put their money to work.” Cliché but it works. No pun intended.

Just as Grandmothers work on the market, money works on the financial market.

Financial markets

Nearly all publicly traded instruments* are available in the financial markets. Each one of the instruments has its own level of risk and application. For example, currencies and cryptocurrencies are considered risky, so they are best traded rather than invested in. Shares are somewhere in the middle. Using all your capital to buy single company shares is a bad idea however using all your capital to buy 50 company shares is a good idea. It already has a name for it – fund*.

Publicly traded instruments – For example – bonds, stocks, currencies.

Fund – Financial Instrument composed of several shares. For example – S&P500.

Debt securities – a negotiable or tradable liability or loan.

The option of low risk and therefore low yields is debt securities*. They are guaranteed by the government that provides security but also limits your profitability. Each person needs to equate the portfolio to their own interests and goals.

Let’s put things into perspective

The following are John’s figures:

Monthly salary after tax (net) – 1500,00€;
Monthly savings – 500,00€;
Annual capital gains 7%;
Currently 23 years old;
Plans to retire after 20 years.

The annual savings will be 6000,00€ (12 * 500,00$).

After the first year, John’s capital will have increased to 6420,00€(7% of 6000,00 = 420,00).

Each year John saves 6000,00€ and earns 7% of the total capital.

Guess what has happened 20 years later.

Note: The Calculator used $ instead of €. In this case, the savings will be slightly smaller.

In 20 years’ time you’ll be at nearly 300,000,00€. It is worth mentioning that this may vary. You may be earning more than 1500,00€ or saving more than 500,00€.

This isn’t the best part.

The figure will grow exponentially by each % for capital gains. If you get 10% instead of 7%, it would sum up to nearly 500’000,00€.

It is important to note that these figures are indeed realistic. The above-mentioned fund S&P 500 brings, on average, 10% capital gains each year. Anyone with a broker/bank account can deposit in this fund.

Return Guide

This post can be summed up in a few steps.

Save at least 20% of your income.

You’re not wealthy, if you earn 400.00€ and spend it all, you’re wealthy if you’re earning $1000.00€ and saving half of it. This should depend on your goals. Faster financial independence=bigger savings/

Open a broker/bank account.

This step is important, therefore, before entrusting your funds to third parties, make sure to research regulations, safety, commissions, costs, and other essentials things. This is important since your life savings will be on the line.

Tip: Most banks have Deposit guarantee schemes that protect up to 100’000,00€ in case of bankruptcy. Make sure that your money is distributed between different banks/brokers.

Choose your investment strategy.

The advice from global investors is to deposit in a balanced manner unless you fully understand all the instruments. If you want to earn passive income, then deposit the money mostly in shares that pay monthly dividends*. If your goal is to earn as much as possible in the shortest amount of time, then search for upcoming businesses such as Amazon* and Apple*.

Apple and Amazon – Example of good companies, that grew rapidly.

Dividends – Part of the company’s profits, which it pays after a certain amount of time to its investors. Worth noting that not every business pays dividends.

Earn, save, invest, repeat.

The more you earn, the more you save. The more you save, the more you invest. The more you invest, the more you earn.

In summary

If one of the goals in life is to provide yourself financially, then this is the safest and easiest way to achieve it. Investing will allow you to understand the world’s economy, personal finance, and teach you to think more sustainable. Being financially responsible is cool and smart. I hope this has inspired you to open your broker’s account and become a financially responsible person.

Note that this article is not written by millionaires but by ordinary people. Everything claimed in this article is based on references and only slightly on personal experience. It is not a 100% guarantee that you will be rich in maximizing all of the above, but in theory, these methods work.