I talk a lot about the global investment markets here. I’m focused on making profits, and often I’m looking to make multiples, knowing full well that some opportunities won’t work out. I’ll get timing wrong or I’ll miss something entirely and need to hedge, reposition, or exit entirely. That’s life.

But I haven’t spent much time on stating the obvious (because I figured it’s obvious) so today’s post is going to do just that.

rich man photo
Photo by State Library of New South Wales collection

We are going to forget all about economics, financial markets, central banks, derivatives, GDP, and all that stuff, and we’re going to go all the way back to some basics. Basics which purple-haired grandmothers everywhere would approve of as they make that second cup of tea from the same teabag.

How to Get Rich… Easily

You’ll see headlines like the above one all over the place and they’re all bullsh*t.

[drizzle]They come neatly packaged with some shiny toothed douchebag standing in front of a rented lear jet or some gratuitous ostentatious far-to-big house while standing next to Mr. Douche is some bimbo with far too large breasts who appears to be only just managing to contain the collagen which infests her lips from exploding over the screen. They simply scream, “Look at me, I’m an asshole!”

Life is nothing like that.

I am writing this because I receive emails from people of all ages looking for advice. From middle-aged guys and gals asking, “What do I do now to get secure?” Secure… not rich, just secure. Why? Because they’ve been making the wrong decisions for at least 2 decades and they’re realizing time is running out and the current path of mediocrity isn’t likely to make them rich, let alone secure. That’s a big problem, which I’m not even going to try tackle here. This article is for those who haven’t yet been led down the rosy path of consumer driven expectations.

This is a 4 point summary for younger guys and gals, someone coming out of college or high school.

The goal here is to build net worth as fast as you possibly can.

Is net worth the amount of accumulated wealth you own? Nope, not really.

That’s a terrible metric. Net worth should really be calculated as a number of years, not a dollar number. I call it “the beach ratio”.

Net worth is the number of years you can sit on the beach doing “sweet FA”. When that number exceeds the number of years you’re likely to keep breathing you’re into the territory where you need to be and you’ll have surpassed secure and become rich.

Your goal should be to ensure you don’t end up like this.

Americans Don't Have Enough Savings For Emergency

or this…

Families Have No Retirement Savings

The above data comes from this this study done by the Economic Policy Institute. A couple of things to consider. The average American couple (that’s two working people!!) has $5,000 saved for retirement. Nearly 40% of the population has $480 saved. How many of that same 40% own a new smartphone? Just sayin’…

So we don’t want to end up there, OK? Let’s get started.

1. Set Yourself a Base FIXED Expense Ratio

Let’s get practical…

Let’s say you come out of college or high school and you’re earning $50k/year. For goodness sake don’t spend more than 10% of your income on accommodation. Now immediately I know I’m going to get a ton of emails saying…oh but you don’t understand Chris…where I live you can’t get a decent apartment for 3x that.

You have to decide if you’re prepared to sell your future upfront for comfort now or not.

When you’re in your 20s you can (and should) flat-share with others to ensure that you don’t castrate yourself financially before you’ve even tried to procreate. I know of people spending 30% or more of their income on rent and doing it well into their 30s, 40s, and even 50s.

That, my friends, is catastrophic to wealth creation and is like dumping a bag of cement on your back and trying to swim the English Channel. Good luck, you’re cementing your path to poverty. Real poverty, like in those 3rd world charity commercials you’ve seen, because for anyone that’s been reading this for some time they are fully aware there is a coming pension crisis and there ain’t nobody to bail you out but you.

The task is to fix your expenses as low as you possibly can and then work your tail off on expanding the right hand side of the ledger.

As a rule of thumb your expenses should never exceed 70% of your net income, though 50% is really the number.

What does this mean?

When you’re in your 20s it means no $7 tequila shots to be had from the gyrating crotch of an intoxicated beauty and no lattes to follow the morning after to cure a hangover.

Body Shots

You won’t have the time. All your time should be focused on generating income streams. If you don’t like the concept then by all means join the rest of the crowd and welcome a life of mediocrity. Nobody will fault you for it because it’s what everyone does. This is your choice. It’s black and white. You’re 20, you have high energy levels, don’t need much sleep, have high risk tolerance, and now is the time you actually should be taking risks.

Create the habit, do what is necessary and do it early. If you’re working as hard as you should be at this age you wont have the time or energy to be spending any money anyway.

2. Increase Revenue

Let’s say that in year one your base salary was $50,000, you spent 70% on expenses ($35,000) and therefore by default saved $15,000.

For the purposes of this article let’s work on a 3% annual pay increase. You’ll be gaining experience, increasing your skill set and this is reasonable. It can easily be higher but let’s be conservative.

Your base expenses remain and your net worth has gone from $15,000 in year one to $31,500 in year two ($15,000 x 2 years + 3% on $50,000).

Realise that in year two you’ve increased your net worth generated for that year by 10% and you’ve more than doubled your net worth because you’ve got your expenses fixed.

My readers are a sharp bunch so you’ll understand quite quickly that if you get more than 3% pay increase it all drops to the bottom line.

3. Take Risk

As mentioned in point 1 above you should be taking risks. What sort of risks?

Risk your time on things that will educate you to be able to execute better. Develop skills that you can monetise.

If you’re in a job, which presumably you are or will be, you should be on a constant lookout for opportunities to try your hand at building business incomes. By the time you’ve been at your job for 3 years, if you’ve not got at least one side business operating outside of your job you’re doing it wrong.

4. Add Additional Revenue Streams and Buy “Long Dated Options”

Your income is going

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