What is the secret to being rich?
Buy things that make you money.
How do I do that?
Step #1: Get a job that makes money.
Step #2: Live on less than you earn.
Step #3: Invest the difference.
What things should I buy that make me money?
Stocks. Specifically, an S&P 500 index fund (example; ticker symbol VOO) which historically compounds at 10% a year over a 20 plus year time horizon.
Why does this work?
- The money invested accrues compound interest.
- S&P 500 index fund ETFs have low expense ratios (management fees) that don’t eat into your profit.
- Index funds are self-cleansing (meaning they buy the winners and sell the losers).
- Capitalism: Constant innovation and development mean that companies continue to grow and are worth more money, making the stock (or portion of ownership) that you purchased in that company more valuable over time based on potential for future earnings.
What is the purpose?
Financial Independence to reclaim your time.
Eventually your financial assets will be so large that you can live off of just the interest. At this point in time, you will no longer have to trade your most valuable non-renewable resource (a.k.a. your time) for money at a job to maintain your lifestyle. This means you are free to spend your days however you see fit which is the ultimate form of wealth. This is called financial independence (FI). The equation for FI is Yearly Expenses (YE) x 25 = your FI number (example; $40,000 (YE) x 25 = $1,000,000). This is based on the 4% rule which states that you can withdraw 4% of your invested assets (assuming they are invested in an index fund like the S&P 500), plus inflation each year and never run out of money.
How long will this take?
Depends on what percentage of your income you invest. Your invested money will double every 7 years at a 10% per year compound interest rate.
Quick math shows:
| % of income invested per year | Years to FI |
| 10% | 33.1 |
| 15% | 28.5 |
| 20% | 25.2 |
| 25% | 22.5 |
| 30% | 20.2 |
| 40% | 16.3 |
| 50% | 13.1 |
| *Assumes 10% compounding interest per year | |
Did this article pique your curiosity? There are endless volumes that can be written on each question addressed. Just know that this method will work. It’s not magic, it’s just MATH.
Love this article? Great! Let me know and I’ll produce more. Hate this article? Well, it’s probably ‘cause you’re a communist who hates math and spurns free time. Why don’t you go ahead, respond, and let me know why I am wrong.
*This article was written by FUBAR 6. All opinions expressed in this article are that of the author. This article is not endorsed by the Department of Defense, the United States Army, or any other state or government agency. Comments to the author can be submitted below.