The Shortcut to Riches

I guess some readers might not be too concerned about the details of FF and really just want the answer to this question : What is the shortcut to riches / How can I get rich quick, etc. So let me cut to the chase and tackle this in post number 3.

Certainly there are many people and companies offering attractive “solutions” to this problem all the time. I’m sure you have all seen adverts to:

·         Become a property tycoon. Accumulate 20 investment properties in 10 years and live off the rent forever

·         Day trade foreign exchange using a “proven” system

·         Work from home as an internet entrepreneur and rake in the cash from your laptop

·         ……

So, which of the above approaches would I recommend ?

I’m sorry to say none of them, and that goes for lottery tickets and the casino too ! While these activities might be suitable for a minority of specialized people, who have the passion and capability to be successful in the particular niche, I do not believe they are good strategies for the average person pursuing FF.

In my opinion and based on my experience, the best shortcut is to avoid all such shortcuts. Now I fully appreciate this might be a disappointment to those who were expecting a more upbeat, exciting or revelatory post. It is human nature to look for the shortcut and everyone is tempted by the idea of getting more for less. Some might also suspect there is a hidden secret or magical formula, known only by the wealthy few, and if only this could be discovered.

While I am all for enthusiasm, optimism, and entrepreneurship; these need to be grounded by realism and a healthy skepticism. And for those looking for excitement in their life, I would suggest this might be better sought in other areas such as social, sport, travel, hobbies, etc. For the vast majority, it’s preferable to be steady and even boring when it comes to money management.

Referring back to my earlier post “What is Financial Freedom”, these get rich quick schemes all tend to start at the bottom of the waterfall. The approach is how can I accelerate my Investment (bucket 4) and achieve better returns than normal. It also might involve borrowing money to leverage these investments, e.g. investment property loan, margin loan for shares. This might be considered as negative Savings (bucket 3). So far we are touching buckets 3 & 4, and neglecting buckets 1 &2. Another way of looking at it is : “Since my waterall isn’t flowing fast enough I need to tap into another water source and fill up my Investment bucket faster !”

Now don’t get me wrong, these approaches can work in some cases and there may be valid examples of it. However in my opinion they involve a high level of risk and are not the best approach for the majority. So what then would I suggest ?

Focus your efforts at the top of the waterfall, not the bottom. If your waterfall is not flowing fast enough, the first thing to consider is what steps you can take to increase Earning (bucket 1) and/or decrease Spending (bucket 2). If you do this well, then buckets 3 & 4 will take care of themselves especially with compound interest on your side over the long term. This is a much better pathway to FF which I will discuss in more detail in the next post……

Meanwhile please feel free to comment and share any experiences you have had, either good or bad, with get rich quick schemes.