Unless you were born into a rich family, building wealth can be very hard depending on the path you choose. Many people look at multi-millionaires and desperately want to know: What’s their secret? How did they get there? And what does it take? What connects all-self made millionaires is that they have acquired their riches by leveraging a pre-defined wealth accumulation strategy and in this article, I will share with you the 4 paths to becoming rich so you can embark on your own money making journey!
Let’s face it, when it comes to building wealth most people have no idea where to start. They ask themselves questions like, do I need to find a high paying job or do I have to save every dollar I make? While doing both of these things will help you increase your net worth over time, the most reliable way to amass a significant wealth is to follow one of four pre-defined paths. Let’s now follow the journey to riches of four people: Steve, Jasmine, John and Hayley and the uncover the strategies they employed to build their own seven-figure realities.
Path Number 1: Steve “The Saver-Investor”
Meet Steve. Steve is a 27-year old teacher in Chicago and since he was young has dreamt of becoming rich but on a teachers salary, he knows that he must employ regimented financial practices into his life to make this happen which he does quite masterfully. In fact, all of his friends refer to him as Financially Savvy Steve as Steve prioritizes the management of his money by budgeting, establishing an emergency fund and of course making regular contributions to his investment accounts.
Being a low-maintenance guy, Steve lives in an affordable apartment with his fiancée and while he would love to own a fancy sports car, he relies on the Chicago transit system to get around town. In fact, one of the things Steve prides himself on the most is how frugally he is able to live. By being a conscious spender and minimizing his costs related to his major three expenses of housing, transportation and food, Steve is able to save 30% of his income every month. Following his regimented spending plan, Steve has been able to amass a net worth of roughly $150,000 in his late 20s. Steve attributes this great progress to understanding his wants versus his needs and making sure to contribute to his investment account every single month.
As outlined by the famous study “rich habits” by Tom Corley, just less than 22% of millionaires follow the money making path that Steve did which is known as the Saver-Investor path. Not only is it the easiest way to build wealth, but if you start early like Steve did, it almost always guarantees that you will end up with a lot of money. In the 2004 study, Corley found that people taking the Saver-Investors path reached their first $1 million around their mid-to-late 30s, and accumulated an average net worth of $3.3 million by their mid-50s.
However, all paths to riches have their downsides and the saver-investor model certainly has its flaws. The major drawback of the saver-investor path is the sacrifices in lifestyle one must give up in order to achieve their financial freedom. The typical saver-investor earns an average salary meaning that they rely upon frugality to grant them access to the money they need to invest and ultimately grow their wealth. This means giving up many lifestyle luxuries like owning expensive cars or being able to purchase all the latest gadgets but luckily as I previously mentioned, this doesn’t have to be a permanent way of life with the average saver-investor hitting the millionaire mark somewhere in their mid to later thirties.
Path Number 2: Jasmine “The Dreamer”
Meet Jasmine. Jasmine is a 31 year old actress living in Hollywood. Ever since Jasmine was a little girl she dreamt of starring in popular movies and TV shows and after moving to California at the age of 23 she has worked every single day to make this dream become a reality. In fact, for the last 8 years Jasmine has been working more than 60 hours a week, sacrificing her weekends and never taking a vacation.
Jasmine adopted this dreamer mentality from her father, who, by following his own dreams, was able to build one of the biggest businesses in her hometown. Jasmine’s father always preached to her that pursuing your dreams is the best way to reach your financial goals and while Jasmine struggled for many years to make ends meet, about a year ago her luck changed for the better. Jasmine was cast as a lead character for a new day-time soap opera that would be paying her $50,000 an episode. Jasmine hoped that this breakthrough in her career would mark the end of her financial struggles and the start of her quest towards living a 7-figure lifestyle!
According to the Rich Habits study, the hardest path to building wealth is the Dreamer path because it requires the pursuit of a dream, such as starting a business, becoming a successful actor, musician or author. Of all the rich individuals Corley interviewed, approximately 28% of them had leveraged their dreams to build their fortunes with the average person having a net worth of $7.4 million which was usually built over a period of about 12 years. But besides the money, those interviewed stated that most gratifying part of going down the Dreamer path was the satisfaction they felt from having pursued the life they had always dreamt of living rather than trading in their precious time to an employer for a reliable paycheck.
However, like the saver-investor path, this road to riches has its flaws. For the Dreamer, this typically involves a lot of financial stress. You see, until you achieve the dream you desire, whether it is obtaining a record deal as a singer or being cast on a show like Jasmine, coming across money can be tough. This means working low wage jobs that barely keep you afloat until you can get your big break and start to see your levels of income dramatically rise. However, this path also has the unique extra benefit of satisfying a dream versus just filling up a bank account and that isn’t something that should be discounted when choosing your path to riches.
Path Number 3: John “The Company Climber”
Meet John. John is a 39- year old business executive working at a management consulting firm in Boston. Since graduating from Harvard roughly 15 years ago, John has invested countless hours in building up his personal brand and accumulating experience at the company he works for. John has always wanted to become a high-powered executive as he admires the respect that top level management receive as well as all the perks that go with holding this type of role. From flying first class to having a company car, John knows that his path to wealth lies in climbing as high as possible up the corporate ladder.
But John didn’t always have this high of ambitions until he took a marketing course in college. While going through the class, his professor could see that John was quite the people person and was able to make connections with his classmates with ease. Knowing that relationships were the key to business success, he recommended that John consider a career in consulting and said that if he was willing to put in the work, he could climb the ranks and become a 1% income earner.
Now, the Company Climber path is arguably the second-hardest path to becoming a millionaire, and about 31% of people in the Rich Habits study fell into this group. It took these individuals an average of 22 years to accumulate a net worth of $3.4 million or more. In most cases, their wealth came from either stock compensation or a partnership share of profits.
Now, if you ask me, the Company climber model has the most drawbacks of all four paths to riches. First, it takes the most amount of time to become rich at 22 years. Second, you are putting the outcome of your success in the hands of others. It is not uncommon for people working in large firms to find their career growth stagnating if their boss dislikes them or if the company falls upon hard times. And when it comes to your future wealth, I think it’s best to be in as much control as you possibly can be. Finally, the biggest drawback is that you are exerting countless hours of effort to make someone else rich rather than being the primary beneficiary of all your hard work. You see, when you work for an employer, they will try to pay you as little as they can in order to keep the profits to themselves and this greed is a major factor in why this path to riches is longer than the others.
Path Number 4: Hayley “The Virtuoso”
Meet Hayley. Hayley is a 37-year old computer programmer working at a tech company in Houston, Texas. Hayley has always been the odd woman out in her field, not just because the field of programming is pre-dominantly pursued by males but because she is one of the top performers in her industry. In fact, over the course of her career, Hayley has won numerous programming awards and has climbed the corporate ladder very fast as a result. Besides holding a high-level position at her company, Hayley supplements her income via consulting work and is a regular presenter at programming conferences.
While most people associate Hayley’s success with natural intelligence, she knows that her level of progression in her field is the result of all the hard work she’s put in over the years. From acquiring multiple degrees in her field to putting in more work hours than most of her peers, Hayley has truly earned everything she has received.
As per the Rich Habits study, the virtuoso group makes up the smallest percentage of the population with just 19% of the participants having chosen this path. Virtuosos are among the best at what they do in their profession. They are paid a high premium for their knowledge and expertise, which sets them apart from the competition. Study results show that it takes about 20 years to reach an average net worth of $4 million for those who pursue this path to riches. Many virtuosos work in high-paying fields like medicine and law for large, publicly-held corporations, or they are small business owners with highly profitable enterprises. One main contributor to a virtuoso’s success is their ability to delay gratification. As seen in the example of Hayley, she was willing to put in years of schooling in order to obtain more expertise in her field than the average programmer which has now led to her assuming an executive role in her company and allowed her to earn a very lucrative income.
While the virtuoso path worked out for Hayley, it doesn’t mean that this route to financial well-being is ideal. The first challenge with leveraging the virtuoso way is the upfront and ongoing cost. Being a knowledge leader in any field requires a large financial investment in education. As seen in the example of Hayley, it required her to obtain multiple degrees to gain a competitive advantage over her peers. But the work doesn’t just stop there. Being a subject matter expert means staying up to date so if you choose this path to riches then you must be committed to ongoing education. The second challenge with this path is the timeframe. The virtuoso path is the second longest meaning that you will be well out of your youthful years when you are finally rich. Finally, like the Dreamer and Company Climber paths, this journey requires you to exert countless hours of effort in order to maintain your skillset and build your brand which can be less efficient in growing your wealth than leveraging the power of investing seen in the saver-investor model.
Ultimately, if you want to be rich you must follow one of these four pre-defined paths so now it’s time to answer the question, which path will you take to your own 7 figure lifestyle?