One-Step Guide to Becoming Rich Ryan Guenther June 13, 2007 permalink

Becoming rich is not complicated. Calculating the launch vector to send a rocket to Pluto is complicated, involving all sorts of higher level math (ie grade 10 and above). Becoming rich involves no math more complicated than addition and subtraction.

The reason most people don't do it is that it's difficult. Finishing a marathon is another thing that is difficult, but not complicated: all you have to do is not stop running till the end.

The One-Step Guide to Becoming Rich is this: Spend less than you earn. The more you earn and the less you spend, the richer you become.

It sounds like common sense. It should be common sense. And yet, as sense goes it's anything but common. The national savings rate has been negative since 2005, which means that for two years the collective US citizenry have been doing the exact opposite of the One-Step Guide to Becoming Rich. They are in fact following the One-Step Guide to Becoming Poor.

Probably because if you are like most people, you don't actually want to be rich, you want to appear rich. You want the Lexus SUV and the 78 inch plasma screen to make your neighbours jealous. You don't even know how to calculate your net worth, or what it means when the number is negative.

And ironically, it's the desire to appear rich that prevents people from becoming rich. Trying to impress your neighbours is the very first thing on the list of 10 Reasons You Aren't Rich.

Another good one is #6: You Try to Make a Quick Buck. Gambling is more popular now than ever, and it's part of the same larger problem. Kids today (and I'm including pretty much everyone under the age of 40) are really bad at math.

Sure, you can probably do basic addition with a calculator, and some of you may remember what a ratio is, but on a fundamental level you don't understand how numbers work. Otherwise, you would be following the One-Step Guide. You have a 0.00000125% chance of winning the lottery, which means you have a 99.99999875% chance of losing.

However, that kind of math is complicated, and the One-Step Guide to Becoming Rich was specifically designed to not be complicated. Therefore, rather than worrying about calculating probabilities and ratios, I present to you the Lottery Corollary to the One-Step Guide to Becoming Rich: You will not win the lottery.

There was a time when spending less than you earn would've been called "saving," but despite the best efforts of The Dutch, "saving" is passé. Today's hip internet slacker doesn't want to "save," you want to "invest" and buy "stocks" and "currency hedged mutual funds whose asset mix and investment strategy you don't understand."

But that's the beauty of the One-Step Guide. It really doesn't matter that much what you do with the money, as long as you don't throw it away on consumer toys like DVDs, camera equipment, hookers or brokerage fees. If you spend less than you earn, you can't help becoming rich. Maybe you would become richer faster if you made better investment decisions, but there's a corollary for that too: You are not Warren Buffett.

Every month that you follow the One-Step Guide, you will be richer than the month before. It's a virtually foolproof system.

The only flaw is that even though you will have more and more money as time goes on, you can't spend it. Ever. Once you spend the money, you're not rich anymore. Like the One-Step Guide itself, it's pretty much common sense, but it's a bit of a catch-22.