So you want to be rich.

So you want to be rich, eh?

Well, this may come as a bit of a shock to the trust-fund babies in the back row, but most of the 'rich' in North America (which I personally define as having over $500,000 in net worth), do not come by their money by ways of inheritance or gifts.

Actually, the largest majority of the rich are working class folks such as your tradesman neighbour.

Ye of little faith, check out 'The millionaire next door'.

Although this book is a little old, having been published in 1998, I personally believe that many of the tenets within have held true.

By working a steady job, earning a decent wage (much like most trades will provide), early in ones life, living below ones means, and investing patiently, I believe that anyone can retire at an earlier date, and with more assets then most.

For example, we can take a person such as myself:

Age: 26
Occupation: I.T. - soon to be Welder
Expected Wages:
   I.T. - ~$40,000 /year
   Welder - ~$45,000 / year + Overtime

I will work hard and make $50,000 take-home, with raises of ~$2000 /year as I gain experience and education.
I will invest as much as comfortable (~$25,000 + $1000 /year)
I will seek investments that are >2% dividend yield.
If I realize a return of ~4% after inflation (~3%), I will see a growth of ~7%.

Over the next 14 years, this investment will grow to over ~$733,000!

This means that when I am 40, I will have 3 quarters of a million dollars to my name.
Does this take into account taxes? No.
Does this take into account large raises or significantly higher wages? No.
Does this take into account market volatility (up or down)? No.
But, it does show that if you have the balls, and some luck, you can be rich before you're 40.

Will it be easy? No.

But it is possible, and as a wise man once said:

"The first hundred-thousand was hard. After that, it got easier."


----

Want to see the math in action? I've posted the results of my spreadsheet calculations below, and also ran them out to the usual '40 year' working period:


Bonus Calculation Chart:

Year	Invested	Rate Of Return	Result
1	25000.00	0.07	26750.00
2	52750.00	0.07	56442.50
3	83442.50	0.07	89283.48
4	117283.48	0.07	125493.32
5	154493.32	0.07	165307.85
6	195307.85	0.07	208979.40
7	239979.40	0.07	256777.96
8	288777.96	0.07	308992.42
9	341992.42	0.07	365931.88
10	399931.88	0.07	427927.12
11	462927.12	0.07	495332.01
12	531332.01	0.07	568525.26
13	605525.26	0.07	647912.02
14	685912.02	0.07	733925.86
15	772925.86	0.07	827030.68
16	867030.68	0.07	927722.82
17	968722.82	0.07	1036533.42
18	1078533.42	0.07	1154030.76
19	1197030.76	0.07	1280822.91
20	1324822.91	0.07	1417560.52
21	1462560.52	0.07	1564939.75
22	1610939.75	0.07	1723705.54
23	1770705.54	0.07	1894654.92
24	1942654.92	0.07	2078640.77
25	2127640.77	0.07	2276575.62
26	2326575.62	0.07	2489435.91
27	2540435.91	0.07	2718266.43
28	2770266.43	0.07	2964185.08
29	3017185.08	0.07	3228388.03
30	3282388.03	0.07	3512155.20
31	3567155.20	0.07	3816856.06
32	3872856.06	0.07	4143955.98
33	4200955.98	0.07	4495022.90
34	4553022.90	0.07	4871734.51
35	4930734.51	0.07	5275885.92
36	5335885.92	0.07	5709397.94
37	5770397.94	0.07	6174325.79
38	6236325.79	0.07	6672868.60
39	6735868.60	0.07	7207379.40
40	7271379.40	0.07	7780375.96

Want to use this spreadsheet for your own calculations? Comment below and I'll e-mail it to you!

Giving a Friend Permission to Spend

I have a friend at work who fulfills any and all of his wants, on a whim.
Whenever he has more then a $100 in his chequeing account, he immediately liquidates it on a want.
If there isn't quite enough to cover the want, then it goes on a credit card.

This would be a decent, if future-less life strategy, if he paid off his credit card every month, and had no debt.
The problem is, he has nearly $30,000 of debt in a line of credit.

He will come to me asking for advice on his most recent want.
I tell him the same thing every time.

1. Make an emergency fund of $1000.
2. Set a small monthly amount (~$100) for discretionary spending.
3. Pay off the debt with everything left over after necessities.

He does not follow this advice.
Instead, he will come back to me for more advice.
Then I realized something.


He is asking for permission to spend!


I  I think this is why we have such a strained friendship at timesonly give him permission to spend a the small discretionary budget, and. Personally, I don't feel a need to spend money all the time; I am usually happy with inexpensive or free diversions.

It has gotten to the point where I can't even bear to speak to him about money anymore.
Everytime I tell him to save money and pay off his debt, he will leave depressed.
Worse yet, he will come back to see me again with a new toy in hand, happy as a clam.

He knows that this is not a healthy pattern of behavior, but he continues never-the-less.




What can we do to help this wild spendthrift?

There isn't much we can do directly.

But, we can make our frugal lifestyle seem better and better every time we see them.

We can also show them a calendar that states exactly when you're planning to retire, and how it is many years (maybe decades!) before they even thought possible.

Then, explain that the date keeps inching earlier and earlier due to our good habits, and putting windfalls towards it.

Leading by example, we can help those without the natural willpower to save and invest.



EJ

Taking loans from family members

I'd like to talk today about a topic that I've often had come up from my friends (and even some of my relatives).



Should I take a loan from a family member, Jack? They really want to help me, and I really need the money!

There are a few questions we have to ask ourselves:

1) How badly do you need the money?

Are you so broke you can't buy food, or are you just paying off your credit card enough to let you get another double-fudge mocha-chino?

2) How long until you will be able to pay back the loan?

If you have no idea when you will be able to pay the person back, then you should seriously review your reasoning behind considering this a loan, and not a forced 'gift' from a relative.

3) What is the money for?

Do you need the money to purchase something you don't need, like a new TV, or a high-end coffee-maker? Then you don't need that money, you need to grow some will-power.

4) Does the person you are taking the loan from need the money more then you?

I have seen people take a 'loan' from a parent that didn't have two pennies to rub together, and was hair-deep in debt. The person taking the loan didn't even flinch when they spent the considerable wad of loaned cash at the bar, treating all her friends to cocktails and martinis.



But Jack! I really want the new (Consumer garbage) now! It's only (Inflated price), and I can't live without it! Daddy will pay for it from his RRSP!

Grow the hell up.

You are an adult now, or soon will be. You've got to belly-up to the reality that you're rarely going to be able to afford everything you want.

You've also got to accept that by being so spineless, you're influencing people to be just like you.

Your relatives don't need to lose more money. They likely had to endure some sort of hardship for it, whether it was working for 20 years straight, or inheriting it from a loved one.

And just think, if your children grow up to be just like you, eventually, you'll be on the receiving end of these same pathetic cries for money.

Key Points:
- Be responsible.
- Don't pull others down into your pit of debt.
- Consider other people's situations.
- Don't spend money when it's not nessicary.
- Grow some willpower.