I read everything I can get my hands on. I enjoy it. I like learning. I think part of the reason I love it is because I think of it as being very individualized. You get to pick what you’d like to learn about – then learn it (or not) at your own pace. Reading exposes you to new ideas and new ways of thinking. Forcing your brain to process information keeps you sharp. Because my interests run in that direction and because I maintain this blog, I tend to read a lot of business books. I think it’s one of the best things you can do with your time, but it’s no substitute for common sense. You can read all the books, blogs, magazines or whatever, in the world, and it won’t make you wealthy.
Read the title. It isn’t news. It’s fairly intuitive. There are essentially only two ways to build wealth: (1) Investing, or by (2) Building equity in a business. The first occurs from saving and investing your money. Saving requires that you spend less money than you earn. Depending on how much you earn, that probably requires you to live somewhat frugally. Saving alone won’t do it, though. The investing component is essential. Almost everything you buy decreases in value as soon as you buy it. Gadgets, cars, televisions become worth less almost immediately after you buy them and continue to do so the longer you own them. Doesn’t it seem silly to buy these things? Would you lend me a dollar if it would only be worth fifty cents when you got it back? Only assets give you a chance at accumulating wealth. Assets (stocks, bonds, real estate) hold their value, or, ideally, increase in value over time. Only investing your money gives you this wealth building edge.
The second way to build wealth is by building equity in a business. Self-employed people make up less than 20% of the workers in America but make up two-thirds of the millionaires. Any time you’re working for someone else, the reason they can afford to hire you, theoretically, is because they are making more money off of your work than it costs to pay your salary and benefits. If you think about the wealthy and financially successful people you know, I think this holds pretty true. The people I know who have had the most success aren’t working in management for big companies, they’re working for themselves in their own companies. That’s not to say that everyone who is self-employed is wealthy, because many people aren’t. Like any investment, starting your business often has greater risk but also has a potentially higher return. If you’re reading this in the United States, you’ve had the good fortune of living in a country that both encourages and reveres entrepreneurs. In fact, according to this article, we’ve done a better job at fostering entrepreneurship than any country except New Zealand. Think about the obvious correlation between this and the overall wealth of a country as you look at that linked list.
I guess the point I was trying to make in my intro was this – you can read all the business books, self-improvement books, investing books, etc., but none of those books contain some sort of secret formula for success. The formula is one you already know. Work hard, spend less than you earn and invest your money. If you have an inclination toward entrepreneurship, even better. In either case, live beneath your means. Good luck. After you’ve built an extraordinary amount of wealth, think about donating to the site;) Thanks for reading.
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#1 by russds – Path to Peace on June 25th, 2009 - 10:49 am
Great article. I love the simplicity and bottom line approach. Sometimes i get overly focused on reading, studying, learning about every little investment trick or way of making money there is. But it’s good to remember the basics: work hard, spend less then you earn, and invest. Good mantra.
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Todd Metheny Reply:
June 25th, 2009 at 12:23 pm
Hi Russ. I agree completely. It’s easy to get caught up with investment choices. Being reminded of the basics once in awhile can’t hurt. Thanks for contributing!
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#2 by Becky on June 30th, 2009 - 10:15 pm
Reading is one of my favorite past times too. Nearly 75% of what I know today is due to reading. I have to say though, when it comes to business – especially running your own business, I feel that there are some tricks that you can get by reading a good business book. For instance Jack Bergstrand’s book, “Reinvent Your Enterprise: Through Better Knowledge Work” has been a godsend. It helps people improve their companies better and faster by adopting the next frontier of management—systematically improving knowledge work productivity.
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Todd Metheny Reply:
July 1st, 2009 at 6:34 pm
Hi Becky, thanks for the book recommendation. I will see if the StL library has it, and if so, I’ll check it out.
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#3 by Bruno Vartuli on July 12th, 2009 - 5:39 pm
The philosophy of investments is some thing that you have to be born with. it is a gift of nature. Of cause you learn by reading books and other material but if you haven’t got that special gift to understand the tricks of the trade and gain experiences from it, your reading is futile. Often we can see people very succeful in their business and when someone else takes over the business eventually fail. People mainly fail on what they doing because they are not in the job appropriate to their natural gift. We aren’t the same and we aren’t rabots. The most dificult thing is to recognise where we are good at it.
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Todd Metheny Reply:
July 12th, 2009 at 7:47 pm
Hi Bruno, I agree that some people have a special gift when it comes to investing, like a Warren Buffett or a Seth Klarman. However, I don’t think you have to be born with an innate gift to be a successful investor. If you study investing and invest in things that are appropriate for your risk tolerance and knowledge base, I think anyone whose willing to learn can have success from saving and investing.
I do agree that many people probably aren’t in a job that lines up with their talents. Luckily, in this country, we have the luxury of being able to jump from one career to another without much resistance. Hopefully, most people find something they’re good at sooner or later. Thanks for contributing.
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