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ESI Money is a site about managing your money, so you can become wealthy. This site is a summary of over 30 years of money management experience.
Through the years, I have interviewed hundreds of millionaires with the goal of learning from their experiences and knowledge.
I’ve published these as Millionaire Interviews, featuring my specific questions and their responses.
After a few hundred interviews, I realized that there was phenomenal wisdom in several of the questions I asked, especially when the responses from different interviewees are read one after another.
I’ve decided to publish these here on ESI Money in my Millionaire Wisdom series.
Note, not every millionaire answered every question and I did change around questions from time to time, that’s why every millionaire isn’t listed below.
Today we continue the series with millionaires, addressing the following question:
What advice do you have for ESI Money readers on how to become wealthy?
Here are their responses…
Improve yourself. Mindset is important. Get great mentoring. Hire a business/life coach.
Turn off the TV and get to work. Dream BIG dreams and set goals to get there.
Don’t wish for smaller problems wish to get better at what you do.
Don’t work for money, create value and money will come. Do more than what you are expected to do.
The best time to make money is while you are asleep. If you are clocking in to get paid then you are never going to get rich.
You need to leverage your time, money, and expertise.
I do not measure my hourly wage based on a 40-hour work week. I measure my income based on a 24 hour a day 30-day month. As of today, I only make $41.66/hour, but it’s 24 hours 365 days a year.
If you can switch your mindset to a 24-hour time clock you will be acutely aware of your earnings versus your spending.
Inspirations:
Tony Robbins, Jim Rohn, Earl Nightingale, The Bible, MJ DeMarco, The Go-giver, Think and Grow Rich
, How to Win Friends and Influence People
, Robert Kiyosaki, Zig Zigglar, and Art Williams. Plus many more!!!
Always spend significantly less than you earn.
Read. Learn. Listen to others.
Work hard. Pay cash.
And let your money start working for you.
- Know your financial goals, and keep them top of mind each day.
- Be willing to put in the hard work and discipline necessary to achieve your financial goals.
- Change your daily habits and make life decisions that support your financial goals. You can probably live on a lot less money than you think if you keep yourself focused and motivated.
- Don’t complain when things don’t go your way. Resolve to keep going to achieve your goals, and stay positive. Life isn’t always fair.
- Turn saving into a game. Challenge yourself to find ways to have fun and enjoy your life that don’t require spending.
- Stay grateful. By being thankful for the blessings in your life, you’re less likely to want to spend on things you don’t have and don’t need.
Start saving yesterday.
For your next purchase that isn’t essential, such as grocery shopping, ask yourself two questions:
- “Do I really need it?”
- “Can I afford this?”
Last, but certainly not least, read The Millionaire Next Door
Find a method to increase your earnings, savings, and investment that works for you and your significant other.
It’s best to find a way to automate it so growth occurs naturally.
I am in no position to give advice on this and would rather have the other millionaires on this blog chime in!
The only advice I can offer is to believe in yourself. Work hard, follow your passion as that will drive you more than you can ever imagine, and most importantly, be a very kind and polite human. Things will fall into place with time.
You can also bounce off ideas or strategies with the people closest to you as they might sometimes have a point of view that needs to be considered before taking action.
I have to say – I think it starts with attitude. I think and often say – I am really good with money!! And I believe it so I find ways to re-enforce that belief, I look for opportunities, and I use it as an excuse for not buying things that don’t represent value.
When people ask me – how did a single mother get 5 properties – that is what I say – I am good with money. I could have just squandered all those opportunities that came my way but told myself you can’t do that, you’re good with money.
But that’s just the start. You must work on building your earning capability. However you can, you must spend less than you earn and enjoy it, be proud of it – tell people! Then look at opportunities to make all that hard work grow with investing.
Take the ESI framework to heart and do all the aspects of it.
Take considered risks.
Be flexible.
It takes money to make money, which is remarkable when you think about how this works. Converting money in the form of cash to money in the form of an income producing asset hopefully maintains its original value, plus creates more money for you out of thin air.
The formula to wealth does not seem to be a big secret. Just try to earn money, spend less than you earn, and use the leftover to generate more money. I could point toward several examples easily of people who are wealthy and/or retired at a young age who did not have huge incomes when they were working, just very healthy financial habits.
It’s been said that compound interest is the eighth wonder of the world. And while this especially benefits the young, itís never too late to get started. Starting today is better than starting tomorrow, and so on.
Investing is like a snowball rolling down a hill. There’s no such thing as too small of a starting point. Keep investing and keep pressing on, and pretty soon that little snowball starts to gather momentum.
The more surface area (capital) it has, the more new snow (dividends, appreciation) sticks to it over time.
I’m not sure how to end this analogy, but let’s just say if you stick with it, over time you can have a pretty big snowball.
- Develop a strong work ethic (this will make up for a lot of other shortfalls)
- Avoid debt like the plague
- Live on less than you make
- Always be saving/investing (even if it’s a small amount, time is your friend)
Stay focused and make sure you have a goal.
Saving can be boring and unrewarding if you don’t give yourself a little something along the way. We always allowed for things we wanted, like travel, so we wouldn’t feel deprived.
The best advice I can give is keep it simple and automate as much as you can. If you automatically take the savings off the top and transfer that into an investment account, you won’t miss it. And because it is automated you don’t have to make a decision on it and can’t opt to spend it on a vacation or car.
As far as keeping it simple, I think you can’t go wrong with index funds. This allows you to remove a lot of decision-making variables and just focus on expense ratio and asset allocation. Then let time do the rest. The earlier you start this the better, but it is not too late for anyone to get started. The trick is just getting going.
From my experience wealth comes from 2 things:
- Make a good amount of money.
- Use that money to buy appreciating assets that have earnings.
I put assets into four categories:
- Depreciating (Vehicles, Furniture, etc.)
- Non-appreciating with earnings (CDs, Bonds, Savings, etc.)
- Appreciating without earnings (Metals, Art, Collectibles, etc.)
- Appreciating with earnings (Stocks, Real Estate, Business Ventures, etc.)
Category 1 is consumption. Too much of this is wealth destroying.
Category 2 will compound due to interest, but the asset base will be eaten by inflation over time and lose value. It is mostly for providing fixed income and protection of principal by avoiding risk assets. You can’t really build wealth with category 2 which is why I rarely have any funds invested in this category beyond immediate cash reserves.
Category 3 will generally sustain value as it rises with inflation although that can be quite volatile, but it will not compound because there are no earnings. This type of category is often used as a store of value, as a hedge against inflation, or as protection against collapse of a currency. It might keep you from losing value, but it won’t build wealth either. It would just potentially maintain it. Due to the lack of earnings this category is not appealing to me and I have never owned any assets in it.
Category 4 combines the best of categories 2 & 3. It will sustain value as it rises with inflation and compound due to earnings. As such it is the only category that can be relied upon to both create and build wealth. Every dollar I have invested is in category 4.
Sustaining wealth requires retaining those assets and not spending them down. That’s why my “more than enough” number is based on cash flow, not valuation.
I said it earlier and I will say it again the golden rule to building wealth is to spend less than you earn and to invest the difference wisely. The bigger the “gap” between earning and spending, the more powerful the invest component becomes.
You get to choose how you operate in that framework. Personal finance is like an “all you can eat” buffet where you can pick and choose what to put on your (financial) plate.
I truly believe – which explains where I have focused my efforts – that a high income paired with a high savings rate is the fastest path to financial freedom. I chose this path due to my preference for relative frugality over extreme frugality.
It’s not rocket science!
Slow and steady worked for me.
After reading through almost 200 of these interviews, I have seen that the people with the highest net worth are the ones that run their own businesses. I know that I don’t have the drive to make that work. Sometimes it’s good to know your limitations.
Learn as much as you can about personal finance and develop a strategy to grow your wealth. It is a skill that everyone can develop, but it takes effort and knowledge.
Start as early as you can to take advantage of time to work for you in compounding growth.
Some other thoughts:
- Marry well and stay married to one person. Divorce is expensive.
- Pay cash for cars.
- Don’t overbuy on house size.
- Continue to grow your work skills to grow your income.
- Invest in index funds to keep it simple.
- Don’t time the market.
- Don’t try to get rich quick. Slow and steady over a long time is the key.
If you want to become wealthy, study and read up on others who have done it. ESI Money and the Millionaire Interview series is a fantastic place to start.
Also, seek out specific stories, blogs and podcasts that inspire you and your specific path. There is no one right way to become wealthy. Find your very own special way and pursue it.
First develop and maximize your career’s earning potential. This will give you the resources with discipline to create a long term wealth plan that is achievable. This may entail getting an advanced degree or accepting a different role out of your comfort zone where you work.
Also, stick with organizations that are growing as there are always opportunities. You can be the best in your role but if the company is stagnant, you will have little opportunity.
For some, it may entail selecting and training for work that is very much in demand that does not necessarily mean going to college. I have met many plumbers, mechanics, welders etc. that have made large amounts of money and established small businesses with their skills.
Second, develop a spending model that is below your means substantially so you can consistently invest a large portion of your income. Use every tax deferred tool available to you whether it’s a 401k, IRA, SEP or other self-employed plans.
I would summarize my advice as:
- Automate your savings and debt reduction through automatic payments.
- Invest in low-cost index funds.
- Consider using a budget, but in any case, live below your means.
- Consider the power of real estate.
Living below your means and spending discipline.There isn’t anything that my wife and I can think of that we don’t have that would make us more happy.
Experiences heavily outweigh toys.
Earn more money if you’re willing to. If it’s not your W2 job, find a good lucrative side hustle. That’s key.
Then be methodical and relentless for a long time.
Time heals a lot of money mistakes if you are relentless and consistent.
Focus on your career. Pick the right major. I might get hate mail for this but let me say that “follow your passion” works only if you are already rich. If you want to get wealthy major in subjects which are in demand and pay well. Work in sectors which have the highest income potential.
Spend time learning investments and how to manage your own money. I started learning the basics only after I came to the U.S. So don’t be dejected thinking it is too late.
You need to know about managing your own money because you work hard for your money. Don’t let others take advantage of you.
There’s lots of way to become wealthy. One of the reasons I want to share my story is because my wife and I did it the old-fashioned way – brick by boring brick.
I come from the poverty ghettos of Chicago. My father and mother are both druggies and alcoholics. My dad passed away when I was 25 from liver failure and my mom is essentially a walking corpse at this point.
I am very proud of the life we’ve built now as a 33 and 34 year old. My daughter was born a millionaire, and we have more or less guaranteed our financial success. It has taken years of sacrifice and hard work, but I truly believe anyone can achieve financial independence with the right attitude and knowledge.
Start with saving $50 a month, this will train your mind and you will slowly find ways to save more, earn more, and invest more.
Also, I moved to the Bay Area knowing not a soul for the sole reason of there being more opportunity to grow my income. Not everyone can or will want to do this, but try to think outside the box.
You will have to be willing to sacrifice.
I left home at 18 and I have missed many holidays and birthdays due to my military life. Personally as long as my kids are with me, I am okay. When I look at the lives of many of my peers I know I am doing better than 99% of them because I chose to leave home and join the military. I don’t think many people are willing to make that kind of sacrifice.
I also made sacrifices to complete my schooling. I worked full-time and went to school. When I was pregnant with my last son, I was either working or doing clinicals seven days a week. The night I went into labor, I worked a 12 hour shift and got off at 7 pm and went into labor at 11 pm that night. I knew that short term sacrifice would give way to long-term gains and I was rewarded for my sacrifices.
Just start. Get yourself out of debt as quickly as you can, start contributing to a savings and/or investment account, surround yourself with people you want to be like, educate yourself on finances by reading and talking to people who are willing to coach you.
Wealth will come with steady, boring, repetitive decisions to regularly save and invest your income.
If you also get enjoyment out of your job or career, even better!
Explore what makes you happy and what drives your spending habits.
Most people have some emotion or history that drives their money habits and if you recognize what those are you can take control and make conscious decisions about spending and saving.
Be deliberate in each dollar you spend and save to ensure it is building toward the life you want to lead.
This is very much a learning process for us and we are early in the adventure. I have shared our experience but don’t really feel like I’m qualified enough to give advice. There are a lot of good resources out there!
I wanted to share my story to show that yes, there are women breadwinners with kids out there and yes, women can be in control of their household’s finances.
That consistent hard work, both through Earning and Saving, results in an increasing net worth even if less knowledgeable on the Investing part.
I guess I feel like this is the slow and steady approach. 10 years ago our net worth was negative and now our net worth is >$1M.
- Read, read, read
- “All things in moderation”
- Save $
- Guard your time
- Watch the waistline
- Make income streams
- Play defense with your $
- Love your parents and spouse
- Follow these maxims: “My life is what my thoughts make of it”…”we usually get what we want in the long run”…”we become what we think about”…
ESI Money has this thing figured out. Earn Save Invest — such a simple mantra, just rarely followed.
I highly encourage young folks to look at where their money goes and truly evaluate the expenses in your life. Do the things you are spending your money on really contribute to your happiness in life? Should we tie our happiness to spending money on material things and monthly subscriptions? Will you be happier by spending your money more efficiently, saving a larger share of your income, which then opens a wide range of opportunities for you a little later in life. Breaking your back each week to bring home just enough money to support a ton of frivolous spending doesn’t sound fun to me.
We live in a time period that almost everyone has a supercomputer in their hands that costs more than a fridge and ties us into a contract that forces us to send large sums of money to a service provider each month. These devices then enable other companies to entice us all to sign up for a multitude of subscriptions that siphon money from us each month and also make it way too easy to order a cab, take-out food, or really anything with a few swipes and clicks.
Figure out where you are hemorrhaging money, stop the bleeding, and invest it smartly. Not everyone needs to be so frugal that they can retire at 30 on 100k, but everyone should be frugal enough that they can retire at 65 with enough money to live on it until 85.
I believe the key to doing so is understanding the power of compounding and the long-term costs of frivolous spending. If more people understood that money saved today will double every 10 years, folks might be more apt to trim their spending, delay some gratification, and fund their early or traditional retirements.
Wealth is about more than money.
You can’t take it with you – so make sure you live life along the way, and invest in the wellbeing of those you love.
Challenge some of the assumptions of what society suggests is necessary for a “normal” life, and instead determine what actually makes you and your family happy.
Cut out most everything else and use that money to instead fund the ability to have a choice about what you do every day.
All the basics: higher paying career, work hard, frugal lifestyle, live intentionally, save, invest. Be careful if/who you marry. Get educated. Read. Think critically. Don’t fall for all the vapid, self-justifying crap on the internet.
Research finances and money. Understand the reality of debt. Understand basic financial and investment concepts. Then handle your own investments. No one will ever care about your money as much as you do.
But my best piece of advice isn’t any of the above or in anything I’ve answered so far. You aren’t me, and what works for me may not work for you. There are many ways to become wealthy (see all those other millionaire interviews), I’m just sharing a few highlights of my journey. It’s not yours.
This is my best advice, especially if you are struggling or just starting out: You have agency.
From Wikipedia: “In social science, agency is defined as the capacity of individuals to act independently and to make their own free choices.”
You have agency. You get to decide how you want to live and who you want to be. So own it, make it happen. Step up and take control of your life. Shopping is not a hobby. Drinking is not a social event. Consumerism is unsustainable, not to mention boring. Living a sub-par life because you’re clinging to friends/significant-other who drag you down? Rip off the bandage and move on.
Stop mindlessly living. Own your life. Exercise. Eat healthy. Volunteer. Be forgiving. Be flexible. Get (mental health) help if you need it. Get/stay educated. Think about how you want to live, then make it happen. You only get so many years on this planet, stop squandering them.
How will this make you wealthy? It might not, in a financial sense. But it isn’t all about money. If the rest of your life is good, and you can be flexible, you can be ‘wealthy’ with less money and you’ll be happier all around.
