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I love the fact that many challenges in life have very simple solutions.  Becoming wealthy is one of those challenges.  I’ll break down the basics of what it takes to get rich and you’ll see very quickly that it’s not as complicated as you thought.  It will be hard to achieve, but it’s easy to understand the process.

How to Become Wealthy

1. Maximize Your Income
2. Minimize Your Expenses

Seems simple enough, make a lot of money and don’t spend a bunch of money.  You’re probably thinking that spending less seems easier than making a lot.  I’d agree with you at first, but most people I know are very talented spenders, including myself.  I don’t keep cash in my wallet for one reason, I’ll spend it.  It’s harder for me personally to spend money on my debit card but for whatever reason I throw cash around like I have an endless supply.  You may struggle with making cash or even with spending it, but let’s explore how to get rich in the most simplistic way.

1. Maximize Your Income

If you’ve ever read a great book about money or talked to a knowledgeable financial advisor they will generally give the same advice: if you want to be wealthy, find a wealthy person and do what they do.  Well, I read a great book where I came across a startling statistic.  In the book No More Mondays by Dan Miller, there is a breakdown of the millionaires in America and how they reached their millionaire status.  I was shocked to learn that less than 1% of all millionaires in the US consisted of movie stars, politicians, pro athletes, and lottery winners combined!  About 5% were salespeople and consultants, 10% were doctors, lawyers, or other professionals, and 10% were senior executives in large corporations.  However, the stat that really gave me hope was that 74% of the millionaires were entrepreneurs.  It didn’t take long for me to realize what my next goal in life would be.  I immediately took my business ideas more seriously.

If three-fourths of the millionaires own a business, then I will too.  Think about it.  If you want to get an A in your class then you cheat off the guy who aces every test, not your friend with the 1.5 GPA.  If your goal is to get rich and most of the rich people are business owners, it’s time to work smart and cheat off the rich guy.  If you want to take it a step further you can continue to research which types of businesses make the most money, or which ones are easiest to get started with the smallest capital, or which businesses in your area are the most successful, etc.  The goal here is to identify what works well for the wealthy and find an easy way to incorporate their success into your own life.

2. Minimize Your Expenses

Not surprisingly, the strategy for minimizing your expenses is closely related to the strategy for maximizing your income.  Once again, I read a great book that enlightened me to this perspective.  In the book Rich Dad, Poor Dad, the author, Robert Kiyosaki, discusses personal corporations and the tax implications of the rich.  He explains how wealthy people own businesses and store their personal assets under the umbrella of their business.  Why would someone want their business to be the official owner of their car, house, or other property?  One reason is liability protection.  If you get personally sued, your property that is owned by the business is almost untouchable.

The better reason is taxes.  If you’ve ever created a budget, even a very simple personal budget and listed your expenses from largest to smallest you will almost always see taxes at the very top.  This becomes even more apparent as you earn more because you will jump up to the higher tax brackets and owe the government even more money.  Knowing that taxes will be your greatest expense means you have one mission, minimize your taxes.  The great news here is that there are significantly more tax breaks for businesses than citizens.  This is why hiring a CPA to file your end of the year tax return is a must for everyone, especially business owners.  A smart CPA may be able to find thousands of dollars of deductions you might have missed because they know the tax codes and how to manipulate the dollars you’ve spent to get some cash back.  This is way more profitable than trying to save a few bucks with a credit card cash back offer (read my blog: Finances 101: The Truth About Debt to learn more).

Conclusion

1. Maximize Your Income by Starting a Profitable Business
2. Minimize Your Expenses by Hiring a Great CPA to Do Your Taxes

Obviously, this is a very simplistic view of wealth, but trying to over complicate your finances is never helpful.  Do yourself a favor, make a list of your financial goals and brainstorm the easiest solutions to make those happen.  Let simplicity be your guide.  As always, feel free to shoot me an email if you have any questions or leave a comment below.  Thanks!

Disclaimer: I do not have any formal financial education and I am not a certified financial advisor.  Every bit of information I have is from personal experience and extensive research on the subject.  If you are looking for professional financial advice you should seek a qualified CPA or your own financial advisor.  This information is intended to educate and entertain, but is not the final word on the subject.

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