Budgeting is the Key
#getrich #stayrich Are you rich? Do you want to stay that way? The median household can achieve $10M in time to enjoy it by saving aggressively...
The median household can achieve $10M in time to enjoy it1 (adjusted for inflation, so it will be much higher by then!) by saving aggressively and investing in a not-actively-stupid manner. A family with $10M can keep that money, and even, in most cases, slowly grow it, by not spending too much. And yet, despite the fact that at least half of all Americans can achieve this goal, most Americans won’t even make it to even $1M, even by age 75! Worse, of the people who have $10M+, many people lose it!
What’s wrong with everybody? Are they stupid? Are they lazy? Do they not care about their futures? No. They don’t budget towards a goal of being or staying rich, not even in the most minimal sense.
Are you rich? Do you want to stay that way? In 2022, the median household income in the USA was $74,580. As a personal goal, taking in almost five times that is a perfectly reasonable goal for an ambitious and hardworking person in the developed world. And not just now, but forever. Without working.
$30000 worth of monthly spending requires about $10M in investible assets. You, your family, and your heirs will have all that cash every single year from now until forever. What’s the catch? What’s the cost? It’s remarkably small. It’s just a tiny little thing really. And yet so many people refuse to do it. All you have to do is budget towards that goal. Consistently.
Most people think that budgets are complicated, but they don’t have to be. Can you look at your phone and see how much money you have left in your account this month? Can you look at a different account and choose, every single time, not to pull money out until you hit financial independence, and then, only the amount that a simple formula tells you? Can you set up an automatic monthly transaction, and an automatic annual transaction, and occasionally reset them? That’s all2 that’s required.
Of course, budgeting is an art, and like all art, skill will make you better. A great budgeter will probably live twice as nice a lifestyle on the same budget as a terrible one who still gets rich. But can you hit that minimum standard of terrible? Of course you can!
Are you ready to get started? Next post, we’ll talk specifics.
I can hear the objections now. “I can’t afford my house, much less save up enough to earn $10M!” or “My kids’ school is so expensive that I could never do this!” or even “That’s impossible! One bad medical expense and you’re set back decades!” Look, if you think that achieving $10M on about $75K/year of income is going to come from living a conventional life, well then, uh, no. It will require a strongly non-conventional life to achieve this kind of goal without a much higher income. But that’s kind of my point here.
So what’s actually required? Save $28K annually ($2,333 monthly, leaving a bit over $3000 monthly to live on) into low cost, broad, stock market index funds annually for 49 years. For someone graduating college, that means a retirement age of 70. For someone working right out of high school, that means 66. Given how much longer and healthier everyone is living, this is possible!
Ok, ok. I’m overworking that language there. For purposes of this post, “all” includes being willing to spend way less money than you could in any particular moment, basically for the rest of your life.
This is probably a “duh” sort of moment if you think about it. Getting and staying rich means having money, which means that you can’t spend it all, because then you won’t have the money any more. Duh.