To Get Rich: First Get Broke

Broke isn’t bad. In fact compared to most people in the US today being just broke can actually be quite good. 82% of college students don’t pay off their credit card balances each month (Sallie Mae), 66% of the 77 million baby boomers won’t be able to support their current standard of living when they retire (USA Today), and an AARP poll tells us that 28% of Americans spent more time watching reality TV last MONTH than they have spent planning and preparing for retirement over the last 10 YEARS! Most of us are below broke because we owe. How did we get this way?

Because most of us carry debt our entire life and when we have monthly payments we never get full control of our number one wealth building tool: our income!

I consider myself very lucky to have stumbled across Dave Ramsey’s Total Money Makeover book almost 4 years ago. And there was 1 premise in that book (and in others I’ve read since) that makes a whole lot of sense if you’re trying to be rich…

It’s easy to get rich if you don’t have monthly payments! Because all of your income piles up very quickly!

But if you have monthly payments then you are trying to fill up a water bucket with holes in the bottom. You can go your whole life working harder and faster and still making very little progress filling up your bucket. But if you can get the holes plugged then you’ll be amazed at how fast your bucket fills up.

The reason I say broke isn’t too bad is because I define broke as having no debt, and owning all of the items you need to live your current lifestyle (cars, home, furniture, electronics, everything). If you are truly broke, then that means the next dollar you earn is going to add wealth. But if you owe money on anything, then you are still working to get your freedom.

To me being rich is being free. Being free to do what you want, when you want, without owing anybody anything. And if you don’t have debt, then it doesn’t take that much money to be free. I know plenty of people who don’t have an exorbitant amount of money who are rich because they are free. Free from worry, free from obligation, free from pressure, free from stress about money.

The moral of this story? My encouragement to everyone (especially young people) is don’t fall into the trap of having the nice car, the big house, or the lavish clothes before you’re out of debt. Have the discipline to buy things only that you can pay for outright. If you are in debt, work your tail off and scramble to get out as fast as you can so you can start saving and accumulating wealth.

If you have the discipline to control your spending, the discipline to manage your money, and the discipline to start saving early, you are definitely going to be rich. Remember $1000 per month for 1 year (total $12,000) invested ONE TIME at 12% and left alone for 35 years is worth over $2 million! What small disciplined sacrifices would you make today if you knew for sure they’d make you a millionaire tomorrow?

See you in the stairwell,

Rory Vaden
Take the Stairs - Success means doing things you don’t want to do