Here’s how you can use your day job to get rich
Let’s face it: getting rich by working a dozen hours a day for someone else is going to take aeons to achieve. If you study the world’s richest people, you will find that most of them got rich by one (or more) of three methods:
1. Owning a business (eg. Jeff Bezos, Amazon; Richard Branson, Virgin; Jack Ma, AliBaba etc)
2. Investing into real estate (eg. Sam Zell, REIT’s; Leonard Stern, Hartz Mtn)
3. Investing into stocks/shares (eg. Warren Buffett, BRK; Ray Dalio, Bridgewater etc)
Imagine that you could emulate some of the world’s top billionaires, and do what they did. The ease of becoming a baby billionaire may surprise you. Just as Arnold Schwarzenegger became the best bodybuilder by lifting small weights, then progressively heavier weights, over and over and over and over again, your journey to riches will start small and get bigger over time.
Ignore the “get rich quick schemes”, pyramid scams and passing fads. Follow these steps, start small, get rich slowly, and stay rich forever.
1. Create a Cashflow Plan. Every successful business tracks their expenses, so do millionaires and billionaires, and so should you. Keep a written record of every expense you have for at least 90 days. Creating a new habit may be tough at first; remember the gym analogy and just stick with it until it becomes automatic.
2. Use the numbers in step 1 to analyse the Dollar Data, and see where you may be able to shave 5% to 10% off each expense. Is there a better mobile phone plan, can you combine internet and phone for a discount, is there cheaper car insurance premium, or a better deal on electricity? Can you save a few dollars on your groceries, entertainment or other bills? If you can save 10% on your (after-tax) expenses, it’s like giving yourself a 20% (pre-tax) pay increase. The money you save each week or month can be used as the cornerstone of your investment strategy.
3. Use the names in step 1 to analyse the Direction Data, and see where your money ends up. Use Google to discover which companies make money every time you spend. For example, AAMI car insurance is owned by Suncorp. You can probably buy stock in your favourite telco or energy provider by searching for their name. It may be challenging to find stock in the Chinese company who makes a lot of your electronic appliances, but guess where the manufacturer sourced the copper, steel, aluminium and gold which they use to make the item? Most likely they send a part of your purchase price to an Australian mining company. Use the money you save in step 2 to invest into the companies which you identify.
4. Rinse and repeat. Continue back at step 1, as your expenditure will change over time. For example, during 2020, people travelled less (sell airline stocks) and worked from home more (buy stock in Zoom or OfficeWorks). In 2021 and 2022, expenditure of yourself and your friends will change, so keep a finger on the pulse and continue to observe. Continue to step 2 again, as there may be special offers or promotions in future which enable you to save even more money for investing. Continue to step 3 and continue to invest
BONUS TIP: through your job, you are in the unique position to not only observe your own expenditure, but also the expenditure of the customers and the business itself. Monitor suppliers using step 3, and use your “inside knowledge” legitimately to invest into the companies which you can see will do well going forward.
The method of “invest where you spend” will not make you a millionaire overnight, just as you cannot become a bodybuilder/supermodel overnight, but if you stick with the process, you will get there.
Once you have accumulated a solid portfolio of stocks/shares, you can use this as a deposit (ie. don’t sell them, get a bank loan against the portfolio) and invest into real estate business, or other assets. Just as you diversify your stock portfolio by investing into different companies, over time, you will diversify into different assets.
This strategy of “putting your eggs into different baskets” will ensure you preserve your wealth even if there is a stock market crash, a pandemic, business crisis or a lull in the property market. Follow the steps, share your success and always #investwhereyouspend
Jeremy Britton DFA SAFin
Financial adviser since 1992. Crypto geek since 2015.
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