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I don’t have any secrets about getting rich

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At one of my recent talks, something interesting happened. Before I started the talk, we were all sitting around, just BSing and getting to know each other. All of a sudden, one of the guys started asking me very direct questions (almost antagonizingly so):

  • “What are your credentials?”
  • “Are you really rich?”
  • “So is this class basically just ‘save more than you spend, and invest?'”

Now I’m happy to answer the questions, and I did, but the last one made me smile. “Is this basically just save and invest” was said almost scornfully, as if it were completely obvious.

My answer: “Yes!”

Let’s be honest. Look at my course syllabus. There’s nothing revolutionary on it. The key isn’t shocking you with some new strategy I discovered. It’s about getting people to get started.

Some people seem to be looking for the secret bullet to making money–the most exotic investment, the sexiest strategy. This is why there are tons of books on making money with different angles (“All debt is bad!” “Buy gold!” etc).

But I think we have to decide between being sexy and being rich. Here’s what I said before:

“When you invest, there’s a difference between being sexy and being rich. When I hear people talking about the stocks they bought/sold/shorted last week, I realize that my investment style sounds pretty boring: ‘Well, I bought a few good stocks 5 years ago and I haven’t done anything. All I did was buy more when the price went down.’ But investment isn’t about being sexy–it’s about making money, and when you look at the investment literature, buy-and-hold investing wins over the long term, every time. Forget what CNBC or the magazines say about the stock-of-the-month. Do a rigorous analysis, make the right decisions up front, and then re-evaluate your investment every 6 months or so. It’s not as cool as those guys in red coats shouting and waving their hands on CNBC, but as an individual investor, you’ll get far greater returns.”

The guy at my class seemed to summarily dismiss the “save and invest” strategy–even though it’s worked for a very, very long time. I guess it’s just not sexy enough.

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  1. Hahaha, my brother just IMd me:

    My brother: did you really quote yourself on iwillteach

  2. Hermann Klinke Link to this comment

    I guess that’s the same thing with loosing weight. People don’t get that you just have to eat healthy and do sports. That’s it. No whiz-bang-loose-a-million-pounds in-a-millisecond diet. Somehow people do not want to accept simple things, but instead look for some silver-bullet.

  3. BS!
    This is not a way to be rich, it’s a way to save money for retirement. You will never be rich with those technics.
    Let’s say you start with 1000$ (not much but even that is something almost impossible for many people)
    And add (save additional) 500 per month.
    Let’s invest that money into something that will give us 10% return and compound it annually.
    After 30 years you will have just over a 1 000 000. During that time you would have to contribute 181 000!
    So the net profit is more less – 800k
    Divide that by 30 years it took you to save that money. – that’s little over 26k

    Sounds good right?? WRONG!
    now calculate inflation and taxes (3.1% inflation and 25% Ftax + 8%Stax)
    You are left with $225,442
    NOW divide that by 30 years
    substract how much money you invested and you will notice that this way of “being rich” simply sux.

  4. Personally I stay away from sexy stocks.
    Anything that hits the news is usually at the least fully priced.
    Guess I’m a bargain hunter at heart.
    Gotta find the good deals.
    And those are often situated, hidden out of view, at the back of the store.

  5. Commenter #3 makes a fantastic point: In order to become rich, we must discard foolish strategies such as “save money” and “start investing early” in favor of whatever he’s doing.

    Now, from reading that comment I can’t be exactly sure what he’s doing, but I have a feeling he must really be in a hurry to do it because he didn’t have time to type the “cks” at the end of “sucks” and opted instead for a labor-saving “x.”

    You are a visionary, Commenter #3.

  6. What about earning? Save and invest is great. Earn well, save well, and invest well entails the whole picture.

    I can kinda tell that you’re creating a web presence, a mystique, a persona. Many people are “rich” and some of them want to talk about it. I also give people financial advice. In fact someone just called to ask which mortgage to buy. Mostly I counsel people who run into problems with serious debt. My “credentials” are just success stories. If they don’t want my advice, I won’t give it, but I also don’t have a “I can get you out of debt” web site. I just learned some techniques. I have the rare insight of having been rich, poor, and then rich again.

    I do think it’s bold and perhaps a little annoying to position yourself as able to teach people to be rich. It’s the sort of boldness that comes from youth. Ok, concrete critique: You don’t talk about earning power much. Three years ago I was poor enough to go to the food bank, and now I make $100k/yr. I definitely employed some tricky techniques to get here. I remember your story about contract negotiations that ended with a smackdown. Not saying you did anything wrong but can say your stories show both the brashness and the naivete of youth. Ok, keep it up. I keep reading, so you must be doing something interesting.

  7. John, that is a good comment–thanks. I agree that earning is a huge part of it. I’ve written before how you really get rich in 2 ways: Earning more money or cutting costs. So I think you’re right on.

    What do you suggest? Should I start writing about jobs and how to negotiate for raises, etc? How to find better jobs? Or are you thinking something else?

  8. I agree with you, Ramit, but I would also have to agree with “M.” This website would be more aptly titled as “”.

    Either way, however, your advice is ideal for the average person who doesn’t have the common sense to save and invest intelligently in the first place. I work as a stock broker and whenever someone finds this out, they always ask about a good “stock pick.” By this, of course, they mean a stock that they can invest one dollar in and get a million in a few months. Heck, if I knew that I wouldn’t be working right now. It just seems that everyone is looking for the easy way out and it just doesn’t exist.

    Good article, keep up the good work.

  9. You’re right, Victor – everyone is looking for the easy way out. Everyone wants a microwave oven solution – debt consolidation, home equity loans. A crock pot solution will always taste better.

    That was a nice llittle jab there with the “All debt is bad!” statement, Ramit. Here’s an idea – go talk to some rich people. Real rich people. Ones that have been walking around a little longer than you and I. They will tell you time and time again, that avoiding debt is one of the keys. Or just check out the Millionaire Next Door – Dr. Tom Stanley did all the research already.

    Its ok, keep driving that Honda the bank owns. Keep charging on your credit cards. I’m sure you’ll get ahead by going backwards. The fact is: most of America’s millionaires are first-generation rich. And they didn’t get there by way of car payments, credit card brownie points or worshiping the FICO score.

  10. I agree, The Millionaire Next Door is a great book. And yes, millionaires have different habits than most people. But that doesn’t mean they don’t use debt. Reasonable debt can be used as a tool.

    Just because you have small amounts of debt strategically applied doesn’t mean you’re out of control. For example, I’ve said time and time again on this site that credit cards should be paid off in full every month.

    Too many of Dave Ramsey’s converts believe that all debt is bad, and that if someone borrows a little bit, they’ll never ever be smart enough to pay it off. That’s just not true. Sure, lots of people get in trouble with debt. And that’s a problem related to personal responsibility and education. But applying a cookie-cutter solution based on the lowest common denominator–doesn’t that seem foolish?