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The following post is by MPFJ staff writer, Greg Johnson. Greg is a proud husband, father, and debt crusader who is in the process of becoming debt free. Along with his wife, Greg co-founded the personal finance blog Club Thrifty, where they encourage readers to “Stop Spending. Start Living.”
At some point, almost every person will dream about how they can get rich quick. Some of us dream of winning the lottery. Others look for schemes to make as much money as they can doing as little as possible. Still, others dream of turning our hobby into a money-maker so that we can quit the day job that we despise. For some people, these dreams actually come to fruition. For the rest of us, I’m here to tell you that you too can get rich quick. It is just that getting there may not follow the path that you thought it would.
So, how does the average person get rich quick? I’m glad you asked!
1) Spend Less Than You Earn
The number one rule to get rich quick is to spend less than you earn. It seems so simple doesn’t it? So, why is that concept so hard for most of us to understand? Why is it that we are constantly living beyond our means?
While I’d love to give you a succinct answer, the fact is that the reasons vary as widely as the people do. For some, it is the easy access to available credit. For others, it may be that they have a difficult time saying “no” to themselves. Regardless, if you want to get rich and you want to do it quickly, you have to start by adhering to this simple rule.
Trying to become wealthy yet spending more than you earn is like trying to sail across the ocean with a hole in the bottom of your boat. You can’t keep taking on more and more expenses without increasing your income or your financial ship will sink. (Try telling this to the U.S. federal government!) Before you can become rich, you first have to learn to control your expenses. How do you do that? It looks like it is time for #2!
2) Create a Budget
The best and most efficient way to control expenses is to create a monthly budget. Budgets are how we tell our money what we want it to do for us. It is how we tame our money into working the way that it should. Budgets allow us to keep track of where ALL of our money is going.
Let me be clear: I am talking about a written budget. Setting aside “X” dollars a month for bills and believing that you can do whatever you want with the rest of your paycheck is not a budget. You must consciously allocate your money into specific expenditure categories by physically writing it down! If you fail to write it down, you will “lose” hundreds – perhaps thousands – of dollars each month by unconsciously spending it on things that you won’t even remember you bought later.
It doesn’t matter which budgeting method you use. (My favorite is the zero-sum budget.) However, you must make conscious decisions about how to spend your money each and every month. If you do, I promise you that you will begin to “find” money that you didn’t know you were spending.
3) Pay Off Debt
The third way to get rich quick is to pay off your debt. Not only do you want to pay off your debt, but you want to do it as quickly as possible. Ideally, we wouldn’t use debt to purchase items in the first place. However, the fact is that most of us have some sort of debt. The less debt you have, the less money you will have going out…and the more you will be able to save! So, it stands to reason that the faster you pay off your debt, the quicker you will be able to become rich.
For some, paying off debt can seem like a daunting task. That is why I recommend using the “debt snowball method.” Start by paying off the smallest debt that you owe first. Make minimum payments on the others. Once you have the first debt paid off, you then take the money you were using to pay on the first debt and add it to your minimum payment on the next smallest debt. In no time, you’ll be seeing progress and eliminating larger and larger chunks of debt. The faster you eliminate your debts, the quicker you’ll be able to save!
You didn’t think that there was actually a way to shortcut building wealth did you? Building wealth takes time and effort. While using these methods will help you to get on the path to building wealth quickly, they are not the traditional “get rich quick” schemes you may have had in mind. However, if you follow these steps, you will see a change in your financial health in no time. Before you know it, you will feel rich too!
How about you all? Do you think it is actually possible to “get rich quick,” aside from winning the lottery or receiving a large inheritance?
Share your experiences by commenting below!
***Photo courtesy of http://www.flickr.com/photos/68751915@N05/6355220839