During a recent spell of nasty weather, I visited my bookshelf to peruse some of my previously highlighted investment books, and my eye fell on Ken Fisher’s The Ten Roads to Riches: The Ways the Wealthy Got There (And How You Can Too!).
According to Fisher, a member of the Forbes 400, there are only 10 ways to get rich.
(At least, after discounting things you can’t control like a lottery win or a big inheritance.)
Here are his 10 ways:
- Start a successful business. This is the richest road. Prime examples are Bill Gates, Charles Schwab, Sam Walton, Mark Zuckerberg and Jeff Bezos. Of course, you’re unlikely to do nearly as well as any of these men. But that isn’t necessary. With enough time and effort, you can get plenty rich filling a need for a local product or service in your hometown. (That includes starting a plumbing business or putting braces on kids.)
- Become CEO of an existing firm and juice it. This was the method for Jack Welch, Steve Ballmer and others. This requires a lot of years of experience – and generally a lot of loyalty to one company. But if you have the drive and ambition, the salary and option compensation can make it well worth your while.
- Hitch your wagon to a star. This method involves tying your fortunes to a successful business visionary. Charlie Munger did with Warren Buffett, Jeffrey Skoll with Jerry Yang, and Peter Chernin with Rupert Murdoch. This is a tough one though. You have to recognize a visionary early, offer them something of value and stick with them. Not easily done.
- Turn celebrity into wealth. We all know that celebrities are loaded. But unless you’re a world-class athlete, a terrific singer/songwriter or have Lana Turner’s profile, you should probably give this one a pass.
- Marry well – really, really well. This seems shallow, I know, but a Wall Street Journal poll found that two-thirds of women said they’d be “very” or “extremely willing” to marry for money. Half of men surveyed said they’d marry for money too. Who knew? (Expect a prenup, however.)
- Steal it, legally. Some people think plaintiffs’ lawyers are crusading saviors. Fisher sees them as blood-sucking leeches and extortion artists. (He quotes the age-old Mexican curse: May your life be full of lawyers.) But if you can handle law school and pass the bar, this method is a possibility.
- Use other people’s money. This is the most common road for the ultra-wealthy. Managing other people’s money is how bankers, brokers, insurance companies, mutual fund managers, hedge fund managers and personal money managers like Ken Fisher make their millions. (Whether their clients are getting what they pay for is another story.)
- Invent an endless future revenue stream. In this scenario, you create something – a book, a movie, a Broadway play – and find a way for it to create long-term royalties. This, admittedly, is a long shot. If you’re going to try this path, says Fisher, “think lunch boxes.” Products that end up on lunch boxes – Spiderman, Star Wars, etc. – are the really big moneymakers.
- Monetize unrealized real estate wealth. Millions of Americans have gotten rich in real estate. And many will in the future. But Fisher says skip the idea of flipping houses and condos – the transaction costs alone will kill you – and concentrate on good properties in desirable areas with predictable cash flows.
- Take “the road more traveled.” This is the method we focus on here at Liberty Through Wealth. It’s about maximizing your income, controlling your outgo, religiously saving the difference and then managing your investment portfolio intelligently.
The road more traveled is the classic way for everyday people to get rich. Most of us don’t have the time, the capital or the expertise to found and run our own business. But we can always use the stock market – the quintessence of capitalism – to become business owners.
This takes time and discipline. But it’s the surest way to long-term wealth.
This route is not just for high-paid professionals. True, Fisher’s firm has a half-million-dollar account minimum. But he has plenty of former middle-class workers as clients.
Fisher writes, “If your passion is truly social work, teaching kindergarten, or quilting – fine. Then focus on frugality. It can be done! I have clients who were postal carriers, teachers, cops, and so on. They did it. Frugal!”
How is this possible? There’s no magic. These people live beneath their means and save religiously.
“Skip mocha-caramel-triple-lattes,” says Fisher. “Pay off credit card debt. Avoid designer labels… Buy used cars. Eat in more, out less. Total no-brainers. Some can’t do this – just can’t.”
If you can, great. If you can’t, Fisher warns, you better find a higher-paying job.
In other words, see 1 through 9.