To become ultra-rich, it takes creating something such as sticky notes, Facebook or Harley Davidsons. For the rest of us mere mortals, to become rich, it simply takes time and discipline. Heed these steps and you’ll be on your way.

1. Redefine Rich: Some believe $1 million is rich, some believe $10 million is rich. I have a close friend who doesn’t believe he will be truly rich until he is worth $100 million. I encourage a paradigm shift for us all. Rich is not a number. Rich is living your values and priorities. This is different for everyone. It might be children’s education, travel, work, family, reading, gardening etc. Reconsider what a rich life looks like for you and then back into how much money you need to make that rich life a reality. This frees you from some number we are socialized to believe is rich, the pursuit of which is anxiety inducing and the attainment of which surely does not meet expectations.

2. Pay Your “Me” Bill First: Literally the first bill you should pay after receiving your paycheck is to your savings. Your first stop should be your company retirement plan such as a 401(k). Plow as much in as the plan allows and you can afford. If you can put money away in addition to this, well, even better! Why not pay yourself last? Because, after the mortgage, food, gas, a new piece of clothing, and the bar tab we all know there won’t be anything left.

3. Spend It All!: Misleading? Maybe, but the liberating aspect of Paying Yourself First is you can spend everything that’s left. It becomes your choice how to allocate the money that’s left. Notice I said “spend it all”, not “spend more than it all”. In other words, avoid using savings or credit card debt to supplement your income. Instead make changes to your expenses. I assure you this process is very therapeutic because you are in control and doing something good for yourself.

4. Embrace Growth: Your greatest leverage is in getting your money to work for you. If you are too conservative with your savings and have it mostly in cash, CDs and bonds you’re not using your greatest resource to your advantage. Growth assets such as stocks and real estate are what will give you the most bang for your buck over time. By way of example:
- $10,000 at current one year CD rates of 1% would be worth a bit over $12,000 in 20 years.
- That same $10,000 invested in growth investments at a 10% return would be worth a bit over $67,000 in 20 years.

Sure, you need to stomach the ups and downs of growth investments, but if you don’t need the money anytime soon it pays off in spades. Separately, ask yourself whether you are putting your money in an appreciating or depreciating asset. CDs, bonds, stocks and real estate are appreciating assets and they work for you. Cars, boats and motorcycles are depreciating assets and you work for them.

5. Avoid Errors: Becoming rich is hard work. Prevent anything from stripping you of the nest egg earmarked for your life priorities. For instance, adequate insurance coverage is a must to prevent unexpected financial catastrophes such as an earthquake destroying your home. Swinging for the fences with risky investments that promise to get you rich quick almost always turn out to be financially devastating. Spending beyond your means and being stuck with high interest rate debt is financial suicide. Deviating from your investment plan when the market ebbs and flows is why the average mutual fund investor has annual returns of 4% when the average mutual fund is 8%. Success is far more dependent on the avoidance of mistakes than it is on victories.

6. Be Boring: Becoming rich is slow, boring and uneventful. More than anything else it requires tremendous patience and discipline. It is like watching your own child grow. You don’t notice any changes day to day, but one day you wake up to a full-grown adult child and realize that the small and unnoticeable daily progress worked.

People often spend a lot of time hoping they will invent the next sticky note, win the lottery, inherit millions or invest in the next Apple when it is $2 a share. Don’t wait and hope. Take control yourself, follow the above tips and one day you’ll likely wake up to a full-grown nest egg that supports your life’s priorities.

Contributed by Kevin Mahoney, CFP®, Integris Wealth Management